This paper examines the importance of induced technological change in considering the efficiency costs of environmental policy. In particular, in modeling an endogenous formation of energy-saving technology through a variety of intermediates, the paper studies the welfare effects of...

Recent research has clearly demonstrated that economic development is closely related to environmental quality. In last two decades this relationship has been described by the Environmental Kuznets Curves that postulates an inverted U-shaped relationship between pollution and income. However,...