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Energy substitutability and modernization of energy-consuming technologies


  • Hritonenko, Natali
  • Yatsenko, Yuri


The paper examines long-term strategies of capital modernization under different assumptions about embodied technological change, energy regulation, and substitutability between energy and capital. To describe modernization of physical capital, the authors use a vintage capital model with the constant elasticity of substitution between capital and energy. The models take into account (i) availability of new more energy-efficient equipment under energy-saving technical progress, (ii) possibility of buying new capital with various combinations of energy parameters and prices, (iii) controlled scrapping of obsolete capital, and (iv) energy regulation quotas. The paper analyzes how the elasticity of substitution between capital and energy impacts the capital modernization policy. In particular, it is proven that the optimal lifetime of capital appears to be longer for a larger elasticity.

Suggested Citation

  • Hritonenko, Natali & Yatsenko, Yuri, 2012. "Energy substitutability and modernization of energy-consuming technologies," Energy Economics, Elsevier, vol. 34(5), pages 1548-1556.
  • Handle: RePEc:eee:eneeco:v:34:y:2012:i:5:p:1548-1556 DOI: 10.1016/j.eneco.2011.11.014

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    References listed on IDEAS

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    Cited by:

    1. Thierry Bréchet & Natali Hritonenko & Yuri Yatsenko, 2013. "Adaptation and Mitigation in Long-term Climate Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(2), pages 217-243, June.
    2. Yuri Yatsenko, 2015. "Models and Games with Adaptation and Mitigation," CEEES Paper Series CE3S-01/15, European University at St. Petersburg, Department of Economics.

    More about this item


    Elasticity of substitution between capital and energy; CES; Vintage capital; Endogenous capital lifetime; Energy consumption; Environmental pollution;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis


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