The role of environmental and technology policies in the transition to a low-carbon energy industry

Christoph Heinzel and Ralph Winkler

No 07/71, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: In a dynamic general equilibrium model we study the interplay between gradual and structural change in the transition to a low-carbon energy industry. We focus on the welfare-theoretic consequences of diverging social and private rates of time preference and a time-to-build feature in capital accumulation. Both features are particularly important in the transformation of energy systems. We show that only a combination of environmental and technology policies can achieve a socially optimal transition. We thus provide a new reason for environmental regulation to be complemented by technology policy such as a non-distortionary investment subsidy.

Keywords: environmental and technology policy; social vs. individual rates of time preference; time to build; gradual vs. structural technological change; energy industry (search for similar items in EconPapers)
JEL-codes: H23 H43 Q48 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2007
New Economics Papers: this item is included in nep-ene and nep-env
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