IDEAS home Printed from https://ideas.repec.org/a/aea/aejmac/v18y2026i3p304-42.html

Self-Fulfilling Prophecies in the Transition to Clean Technology

Author

Listed:
  • Sjak Smulders
  • Sophie Zhou

Abstract

Technological lock-in has been a standard explanation for the slow take-off of clean innovation, but is hard to reconcile with forward-looking investors who anticipate the eventual switch to clean technologies. We provide an alternative explanation: strategic investment complementarities shape innovation and self-fulfilling prophecies can lead to delayed low-carbon transition. We analyze a standard directed technical change model with clean and dirty inputs. Under good input substitutability, two stable steady states co-exist, each allowing multiple transitional paths. Optimal low-carbon transition requires a Pigouvian tax rule combined with a coordination device; commitment to a Pigouvian tax trajectory cannot solve a coordination failure.

Suggested Citation

  • Sjak Smulders & Sophie Zhou, 2026. "Self-Fulfilling Prophecies in the Transition to Clean Technology," American Economic Journal: Macroeconomics, American Economic Association, vol. 18(3), pages 304-342, July.
    • Handle: RePEc:aea:aejmac:v:18:y:2026:i:3:p:304-42
    DOI: 10.1257/mac.20220316
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/mac.20220316
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://doi.org/10.3886/E238528V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/materials/25595
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/materials/25596
    Download Restriction: no
    File URL: https://libkey.io/10.1257/mac.20220316?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejmac:v:18:y:2026:i:3:p:304-42. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.