Technical Change and the Marginal Cost of Abatement∗

We address one aspect of the treatment of technical change in the environmental economics literature: how technical change impacts the marginal cost of abatement. We review a selection of papers that employ a variety of representations of technical change, and show that these representations have quite different, and sometimes surprising, effects on the marginal costs of pollution reductions. We argue that these varied representations in fact correspond to a variety of different technology options. We then present results indicating that this representation matters — the impacts of technical change on the marginal cost of abatement can crucially impact policy analysis. JEL classification: Q25, Q28, D81, O32