How ongoing structural change creates a double dividend: outdating of technologies and green growth

In this paper we study how the ongoing transition to newer technologies, what we refer to as dynamic structural change, in a doubly-differentiated R&D-based economy can generate both higher economic growth and a slowdown of climate change, thus, creating a win-win situation known as double dividend. We first consider the unregulated decentralised economy and show that ongoing structural change can lead to lower environmental damages than the economy with a fixed structure. Next, we consider an emission tax differentiated across sectors which raises economic growth and reduces emissions in the economy. Our results indicate that promoting transition to newer technologies indeed may serve as a partial substitute to conventional abatement policy options.