Essays in technical change and climate change

Characteristics of the economy such as the share of polluting sectors, and their pollution intensity are key to understanding how to limit costs of climate policies. In particular, this thesis focuses on four different aspects. The first is the increase in climate policy costs in the presence limited sectoral malleability of capital, and thus the impossibility to reallocate capital from the “dirty” to the “clean” sector. Second, we consider the influence of the sectoral coverage of climate policies such as the EU Emissions Trading Scheme. Third, we focus on innovation within the energy sector to illustrate that there are internal dynamics that should be considered as they can lead to higher efficiency in the production of the dirty energy good. Finally, we estimate a model of directed technical change to study the effect of climate policies on the direction of technical change in the energy sector.