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The behavioural aspect of green technology investments: a general positive model in the context of heterogeneous agents

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  • F. Knobloch
  • J. -F. Mercure

Abstract

Studies report that firms do not invest in cost-effective green technologies. While economic barriers can explain parts of the gap, behavioural aspects cause further under-valuation. This could be partly due to systematic deviations of decision-making agents' perceptions from normative benchmarks, and partly due to their diversity. This paper combines available behavioural knowledge into a simple model of technology adoption. Firms are modelled as heterogeneous agents with different behavioural responses. To quantify the gap, the model simulates their investment decisions from different theoretical perspectives. While relevant parameters are uncertain at the micro-level, using distributed agent perspectives provides a realistic representation of the macro adoption rate. The model is calibrated using audit data for proposed investments in energy efficient electric motors. The inclusion of behavioural factors reduces significantly expected adoption rates: from 81% using a normative optimisation perspective, down to 20% using a behavioural perspective. The effectiveness of various policies is tested.

Suggested Citation

  • F. Knobloch & J. -F. Mercure, 2016. "The behavioural aspect of green technology investments: a general positive model in the context of heterogeneous agents," Papers 1603.06888, arXiv.org.
  • Handle: RePEc:arx:papers:1603.06888
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    Cited by:

    1. J-F Mercure & H. Pollitt & N. R. Edwards & P. B. Holden & U. Chewpreecha & P. Salas & A. Lam & F. Knobloch & J. Vinuales, 2017. "Environmental impact assessment for climate change policy with the simulation-based integrated assessment model E3ME-FTT-GENIE," Papers 1707.04870, arXiv.org, revised Jan 2018.
    2. Grubb, M. & Mercure, J. & Salas, P. & Lange, R., 2018. "Systems Innovation, Inertia and Pliability: A mathematical exploration with implications for climate change abatement," Cambridge Working Papers in Economics 1819, Faculty of Economics, University of Cambridge.
    3. Florian Knobloch & Hector Pollitt & Unnada Chewpreecha & Vassilis Daioglou & Jean-Francois Mercure, 2017. "Simulating the deep decarbonisation of residential heating for limiting global warming to 1.5C," Papers 1710.11019, arXiv.org, revised May 2018.

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