IDEAS home Printed from https://ideas.repec.org/a/eee/dyncon/v162y2024ics0165188924000496.html
   My bibliography  Save this article

How clean capital slows down disinvestment of carbon-intensive capital in the low-carbon transition

Author

Listed:
  • Jin, Wei
  • van der Ploeg, Frederick
  • Zhang, Lin

Abstract

This paper explores a novel mechanism through which transitions to a low-carbon economy can proceed smoothly without excessive disinvestment in carbon-intensive capital. The mechanism is analyzed in a Lucas-Uzawa green growth model with carbon-temperature dynamics. Due to the externalities associated with climate damages and learning by doing, insufficient resources are allocated towards investment in clean capital in the business-as-usual market economy. Without green subsidies to stimulate clean capital investment, pricing emissions to internalize the social cost of carbon causes disinvestment in carbon-intensive capital and increases the costs of low-carbon transitions. Pricing emissions and subsidizing clean investment yield a higher return on clean capital and boost clean capital accumulation. This curbs disinvestment in carbon-intensive capital and limits carbon emissions. This highlights the positive role of clean capital for smoothing low-carbon transitions.

Suggested Citation

  • Jin, Wei & van der Ploeg, Frederick & Zhang, Lin, 2024. "How clean capital slows down disinvestment of carbon-intensive capital in the low-carbon transition," Journal of Economic Dynamics and Control, Elsevier, vol. 162(C).
    • Handle: RePEc:eee:dyncon:v:162:y:2024:i:c:s0165188924000496
    DOI: 10.1016/j.jedc.2024.104857
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165188924000496
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jedc.2024.104857?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 search for a different version of it.

    More about this item

    Keywords

    Green growth; Low-carbon transition; Carbon pricing; Learning-by-doing; Lucas-Uzawa growth model;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

    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:eee:dyncon:v:162:y:2024:i:c:s0165188924000496. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jedc .

    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.