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Vintage capital and the diffusion of clean technologies

Author

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  • Théophile T. Azomahou
  • Raouf Boucekkine
  • Phu Nguyen-Van

Abstract

We develop a general equilibrium vintage capital model with energy-saving technological progress and an explicit energy sector to study the impact of investment subsidies on equilibrium 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. Two polar market structures are considered for the energy market, free entry and natural monopoly. First, it is shown that investment subsidies may induce a larger equilibrium investment into cleaner technologies either under free entry or natural monopoly. However in the latter case, this happens if and only if the average cost is decreasing fast enough. Second, larger diffusion rates do not necessarily mean lower energy consumption at equilibrium, which may explain certain empirical observations.
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Suggested Citation

  • Théophile T. Azomahou & Raouf Boucekkine & Phu Nguyen-Van, 2012. "Vintage capital and the diffusion of clean technologies," International Journal of Economic Theory, The International Society for Economic Theory, vol. 8(3), pages 277-300, September.
    • Handle: RePEc:bla:ijethy:v:8:y:2012:i:3:p:277-300
    DOI: j.1742-7363.2012.00191.x
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    Cited by:

    1. Paul Johnson & Chris Papageorgiou, 2020. "What Remains of Cross-Country Convergence?," Journal of Economic Literature, American Economic Association, vol. 58(1), pages 129-175, March.
    2. 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.
    3. Fouad El Ouardighi & Konstantin Kogan & Raouf Boucekkine, 2017. "Optimal recycling under heterogeneous waste sources and the environmental Kuznets curve," Working Papers hal-01693488, HAL.

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