In this paper we used a popular model, RICE99, in order to investigate the economic, environmental and social impact of the factors determining the EKC and their impact on the PIR. In particular we investigated the role played by industrial and environmental friendly technology. We find two main conclusions about the impact of the green and industrial progress considered as exogenous EKC factors.
First, the exogenous industrial technology is the most important EKC factor improving welfare and consumption per capita, but unfortunately is the crucial driving force generating environmental degradation. The output enhancing technological progress which does not affect innovation to preserve environmental sustainability is the key determinant of the trade off between growth and environment. When we assume that industrial and green technological change work independently, the traditional gap between the magnitude of the scale effect and the one of the emissions reducing green technological effect will not provide a turning point in the PIR. An EKC will be likely to exist together with economic growth if strong synergies will arise between industrial and green technological change or, in the case synergies are not technically feasible, if the magnitude of the green progress will overcome the one of the industrial progress. RICE99 implies the violation of these two conditions. One shortcoming of this model is that it considers technological change as exogenous, as “manna from the heaven”. As a consequence, the policy-maker cannot control the technological change process and the green and industrial technological changes are not connected over time. It will be interesting to drive the same analysis with a model including an endogenous mechanism of innovation with a strong interaction between green and industrial technology.
Second, the green technology is not crucial in influencing welfare and consumption, but is more effective than a “Kyoto forever” scenario in reducing emissions. Also including United States, emissions reducing international agreements as designed by the Kyoto Protocol are not likely to generate a turning point in the PIR and further domestic or international policies aimed at strengthening the technological change should be considered to stabilize emissions preserving economic growth. If the green technological change is the key factor for environmental sustainability our future agenda will be addressed to investigate more in depth the mechanisms and the costs governing the green progress and innovation.