The role of environmental and technology policies in the transition to a low-carbon energy industry

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The role of environmental and technology policies in the transition to a low-carbon energy industry

Author Info

Christoph Heinzel () (Department of Economics, Dresden University of Technology)
Ralph Winkler () (Center of Economic Research (CER-ETH) at ETH Zurich)

Abstract

In 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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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series Economics working paper series with number 07/71.

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Length: 39 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:eth:wpswif:07-71

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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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