Transitions to a Sustainable Future
The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development
Edited by Valentina Bosetti, Reyer Gerlagh and Stefan P. Schleicher
Chapter 13: An Endogenous Technical Change Model: FEEM-RICE
Valentina Bosetti, Carlo Carraro and Marzio Galeotti 13.1 INTRODUCTION The FEEM-RICE model presented below is an extended version of the socalled RICE-99 model by Nordhaus and Boyer (2000). RICE-99 is a Ramsey–Koopmans single-sector optimal growth model suitably extended to incorporate the interactions between economic activities and climate. There is one such model for each of the eight macro-regions into which the world is divided: USA, Other High Income countries (OHI), OECD Europe (Europe), Russia and Eastern European countries (REE), Middle Income countries (MI), Lower Middle Income countries (LMI), China (CHN) and Low Income countries (LI).1 The Model General Structure Within each region a central planner chooses the optimal paths of two control variables, fixed investment and carbon energy input, so as to maximize welfare, defined as the present value of per capita consumption. The value added created via production (net of climate change) according to a constant returns technology is used for investment and consumption, after subtraction of energy spending. The technology is Cobb–Douglas and combines the inputs from capital, labour and carbon energy together with the level of technology. Population (taken to be equal to full employment) and technology levels grow over time in an exogenous fashion, whereas capital accumulation is governed by the optimal rate of investment. Compared to the previous RICE-96 model of Nordhaus and Yang (1996), this specification contains a more detailed regional disaggregation of the world. However, the main novelty of the new model is the introduction of an energy input. Because...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.