The role of environmental and technology policies in the transition to a low-carbon energy industry
AbstractIn a dynamic general equilibrium model we study the interplay between gradual and structural change in the transition to a low-carbon energy industry. We focus on the welfare-theoretic consequences of diverging social and private rates of time preference and a time-to-build feature in capital accumulation. Both features are particularly important in the transformation of energy systems. We show that only a combination of environmental and technology policies can achieve a socially optimal transition. We thus provide a new reason for environmental regulation to be complemented by technology policy such as a non-distortionary investment subsidy.
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Bibliographic InfoPaper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 07/71.
Length: 39 pages
Date of creation: 2007
Date of revision:
environmental and technology policy; social vs. individual rates of time preference; time to build; gradual vs. structural technological change; energy industry;
Find related papers by JEL classification:
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-08 (All new papers)
- NEP-ENE-2007-08-08 (Energy Economics)
- NEP-ENV-2007-08-08 (Environmental Economics)
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