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Adjustment Time, Capital Malleability and Policy Cost

Author

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  • Henry D. Jacoby
  • Ian Sue Wing

Abstract

The cost of meeting Kyoto-style emissions reductions is heavily dependent on the malleability of an economy's stock of capital and the number of years available for adjustment. Each year of delay introduces more emissionproducing activities that must be squeezed out of the system and shortens the time horizon for change, raising the carbon price required to produce the needed changes in capital structure. The MIT Emissions Prediction and Policy Assessment model is used to explore the effects of uncertainty in the degree of capital malleability in the short run, and to analyze how implied carbon prices vary depending on the time of credible commitment to emissions targets.

Suggested Citation

  • Henry D. Jacoby & Ian Sue Wing, 1999. "Adjustment Time, Capital Malleability and Policy Cost," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 73-92.
    • Handle: RePEc:aen:journl:1999si-a04
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    Cited by:

    1. Hauch, Jens, 2003. "Electricity trade and CO2 emission reductions in the Nordic countries," Energy Economics, Elsevier, vol. 25(5), pages 509-526, September.
    2. Carolyn Fischer & Richard D. Morgenstern, 2006. "Carbon Abatement Costs: Why the Wide Range of Estimates?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 73-86.
    3. Jacoby, Henry D. & Reilly, John M. & McFarland, James R. & Paltsev, Sergey, 2006. "Technology and technical change in the MIT EPPA model," Energy Economics, Elsevier, vol. 28(5-6), pages 610-631, November.
    4. Wing, Ian Sue, 2006. "The synthesis of bottom-up and top-down approaches to climate policy modeling: Electric power technologies and the cost of limiting US CO2 emissions," Energy Policy, Elsevier, vol. 34(18), pages 3847-3869, December.
    5. Umakrishnan, K.U., 2004. "Income Convergence under the New Economic Model: The Experience of Latin American and Caribbean Countries," Conference papers 331253, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Babiker, Mustafa & Reilly, John M. & Jacoby, Henry D., 2000. "The Kyoto Protocol and developing countries," Energy Policy, Elsevier, vol. 28(8), pages 525-536, July.
    7. McFarland, J. R. & Reilly, J. M. & Herzog, H. J., 2004. "Representing energy technologies in top-down economic models using bottom-up information," Energy Economics, Elsevier, vol. 26(4), pages 685-707, July.
    8. Steinbuks, Jevgenijs & Neuhoff, Karsten, 2014. "Assessing energy price induced improvements in efficiency of capital in OECD manufacturing industries," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 340-356.
    9. Sergey PALTSEV & John REILLY & Trent YANG, 2010. "Air Pollution Health Effects: Toward an Integrated Assessment," EcoMod2004 330600109, EcoMod.
    10. Elisa Lanzi & Ian Sue Wing, 2013. "Capital Malleability, Emission Leakage and the Cost of Partial Climate Policies: General Equilibrium Analysis of the European Union Emission Trading System," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(2), pages 257-289, June.
    11. Steinbuks, Jevgenijs & Narayanan, Badri G., 2015. "Fossil fuel producing economies have greater potential for industrial interfuel substitution," Energy Economics, Elsevier, vol. 47(C), pages 168-177.
    12. Vogt-Schilb, Adrien & Meunier, Guy & Hallegatte, Stéphane, 2018. "When starting with the most expensive option makes sense: Optimal timing, cost and sectoral allocation of abatement investment," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 210-233.
    13. Jacques, Christiane & Lafrance, Gaetan & Doucet, Joseph A., 2001. "Inertia in the North American electricity industry: is it realistic to think that the Kyoto Protocol objectives can be met?," Energy Policy, Elsevier, vol. 29(6), pages 453-463, May.
    14. Muhammad Faisal Majid & Muhammad Meraj & Muhammad Shujaat Mubarik, 2022. "In the Pursuit of Environmental Sustainability: The Role of Environmental Accounting," Sustainability, MDPI, vol. 14(11), pages 1-20, May.
    15. Vechiu, Natalia & Kuikeu, Oscar, 2009. "The impact of globalization on FDIs: An empirical assessment for Central and Eastern European Countries," Conference papers 331877, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    16. Barbara Buchner & Marzio Galeotti, 2003. "Climate Policy and Economic Growth in Developing Countries," Working Papers 2003.91, Fondazione Eni Enrico Mattei.
    17. Mark K. Jaccard & John Nyboer & Crhis Bataille & Bryn Sadownik, 2003. "Modeling the Cost of Climate Policy: Distinguishing Between Alternative Cost Definitions and Long-Run Cost Dynamics," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 49-73.
    18. Babiker, Mustafa H. & Metcalf, Gilbert E. & Reilly, John, 2003. "Tax distortions and global climate policy," Journal of Environmental Economics and Management, Elsevier, vol. 46(2), pages 269-287, September.
    19. Baker, Erin, 2005. "Uncertainty and learning in a strategic environment: global climate change," Resource and Energy Economics, Elsevier, vol. 27(1), pages 19-40, January.
    20. Worrell, Ernst & Biermans, Gijs, 2005. "Move over! Stock turnover, retrofit and industrial energy efficiency," Energy Policy, Elsevier, vol. 33(7), pages 949-962, May.
    21. Ruth, Matthias & Amato, Anthony, 2002. "Vintage structure dynamics and climate change policies: the case of US iron and steel," Energy Policy, Elsevier, vol. 30(7), pages 541-552, June.
    22. Pang, Rui-zhi & Deng, Zhong-qi & Chiu, Yung-ho, 2015. "Pareto improvement through a reallocation of carbon emission quotas," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 419-430.
    23. Ian Sue Wing, 2005. "The Synthesis of Bottom-Up and Top-Down Approaches to Climate Policy Modeling: Electric Power Technologies and the Cost of Limiting U.S. CO2 Emissions," Computing in Economics and Finance 2005 21, Society for Computational Economics.
    24. Viguier, Laurent L. & Babiker, Mustafa H. & Reilly, John M., 2003. "The costs of the Kyoto Protocol in the European Union," Energy Policy, Elsevier, vol. 31(5), pages 459-481, April.
    25. Henri de Groot, 2001. "On the optimal timing of reductions of CO2 emissions; an economists' perspective on the debate on "when flexibility"," CPB Discussion Paper 1.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

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    JEL classification:

    • F0 - International Economics - - General

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