Weanalyze a model of green technological transition along a supply chain. In each layer,
a good is produced with a dirty technology, or, if the required \u201celectri cation\u201d innovation has
occurred, with a clean technology which uses the immediate upstream good. We show that
the economyis characterized by a single equilibrium but multiple steady-states, and that even
in the presence of Pigouvian environmental taxation, a targeted industrial policy is generally
necessary to implement the social optimum. We also show that: (i) small, targeted, industrial
policy may bring large welfare gains; (ii) a government which is constrained to focus its sub
sidies to electri cation on one particular sector, should primarily target downstream sectors;
(iii) when extending the model so as to allow for supply chains also for the dirty technology,
overinvesting in electri cation in the wrong upstream branch may derail the overall transi
tion towards electri cation downstream. Finally, we illustrate our model with a calibration to
decarbonization of global iron and steel production via hydrogen direct reduction, and show
that, absent industrial policy, the economy can get stuck in a \u201cwrong\u201d steady-state with CO2
emissions vastly above the social optimum even with a carbon price in place<\/p>","protected":false},"excerpt":{"rendered":"
Weanalyze a model of green technological transition along a supply chain. In each layer,a good is produced with a dirty technology, or, if the required \u201celectri cation\u201d innovation hasoccurred, with a clean technology which uses the immediate upstream good. We show thatthe economyis characterized by a single equilibrium but multiple steady-states, and that evenin the […]<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":true},"thematique":[],"type-de-publication":[45],"class_list":["post-397","publication","type-publication","status-publish","hentry","type-de-publication-working-paper"],"acf":[],"yoast_head":"\n