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Promoting clean technologies: The energy market structure crucially matters

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Author Info
Théophile T. Azomahou (UNU-MERIT, Maastricht University, The Netherlands)
Raouf Boucekkine () (UCLouvain, Belgium; and University of Glasgow, UK)
Phu Nguyen-Van (THEMA-CNRS, Université de Cergy-Pontoise, France)

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Abstract

We develop a general equilibrium vintage capital model with embodied energy-saving technological progress and an explicit energy market to study the impact of investment subsidies on investment and output. Energy and capital are assumed to be complementary in the production process. New machines are less energy consuming and scrapping is endogenous. It is shown that the impact of investment subsidies heavily depends on the structure of the energy market, the mechanism explaining this outcome relying on the tight relationship between the lifetime of capital goods and energy prices via the scrapping conditions inherent to vintage models. In particular, under a free entry structure for the energy sector, investment subsidies boost investment, while the opposite result emerges under natural monopoly if increasing returns in the energy sector are not strong enough.

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Publisher Info
Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 15.

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Length: 26 pages
Date of creation: 2008
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Handle: RePEc:dpc:wpaper:1508

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Related research
Keywords: Energy-saving technological progress; vintage capital; energy market; natural monopoly; investment subsidies;

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Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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References listed on IDEAS
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kesidou, Effie & Szirmai, Adam, 2008. "Local Knowledge Spillovers, Innovation and Economic Performance in Developing Countries: A discussion of alternative specifications," UNU-MERIT Working Paper Series 033, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
  2. Lokshin, Boris & Mohnen, Pierre, 2008. "Wage effects of R&D tax incentives:Evidence from the Netherlands," UNU-MERIT Working Paper Series 034, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
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