Essays on pollution, scarcity and endogenous technological change

The thesis consists of three essays. In the first essay we develop a method of modeling and computation of the business-as-usual scenario in a single region model of climate and economy. The essay argues that in the single-region model of the world the climate damages are fully internalized. So far modelers have used approximations in order to compute the business-as-usual scenario in this type of models. The method developed in the essay suggests dividing the world into N identical regions with each behaving non-cooperatively. It is shown that when the number of regions becomes arbitrary large the pollution costs become completely external. The solution for the business-as-usual scenario is an Open Loop Nash equilibrium. A number of empirical models are employed to demonstrate the divergence from the previous estimates of baseline scenario.; The objective of the second essay is to consider the trade-off between the scarcity rent and pollution cost in the context of climate change problem and to evaluate the trade-off quantitatively. As the indicator of the trade-off we choose the ratio of the resource and pollution shadow prices. As long as the ratio is greater than unity this is the sign of prevalence of the scarcity rent over the pollution cost. We defined the "true" ratio of scarcity rent to pollution cost as the one when the optimal time horizon is reached. We have also discussed the relevant methodological issues of obtaining the optimal time horizon in the models with zero rate of time preference and showed how the ideas of "cake-eating" literature as well as the idea of avoiding the "repugnant" conclusion can be employed. The "true" ratios corresponding to the no scarcity, medium scarcity, high scarcity scenarios, were calculated and in each case the strict dominance of the scarcity rent over the pollution cost was found.; The focus of the third essay is on the role of technological change for the climate change policies. The empirical evidence suggests the existence of exhaustion of technological opportunities within a particular field of research (so-called "fishing out" effect). However, so far in the top-down models of climate and economy interactions researchers assumed that the past energy-related knowledge facilitates the production of the new knowledge ("standing on shoulders" effect). In the essay we aim to compare the effects of these two hypothesises on the climate change policy. We show both theoretically and empirically that the assumption of "fishing out" effect results in higher values of carbon tax and welfare gains relatively to "standing on shoulders". This essay seems to be the first attempt in the literature to introduce the empirical evidence of existence of the exhaustion of technological opportunities into the analysis of economy-climate interactions.