Promoting clean technologies: The energy market structure crucially matters
Azomahou, Théophile T., Boucekkine, Raouf and Nguyen-Van, Phu (2008). Promoting clean technologies: The energy market structure crucially matters. UNU-MERIT.
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Sub-type Working paper Author Azomahou, Théophile T.
Boucekkine, Raouf
Nguyen-Van, PhuTitle Promoting clean technologies: The energy market structure crucially matters Publication Date 2008 Place of Publication Maastricht, NL Publisher UNU-MERIT Pages 32 Abstract We develop a general equilibrium vintage capital model with embodied energy-saving technological progress and an explicit energy market to study the impact of investment subsidies on 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. It is shown that the impact of investment subsidies heavily depends on the structure of the energy market, the mechanism explaining this outcome relying on the tight relationship between the lifetime of capital goods and energy prices via the scrapping conditions inherent to vintage models. In particular, under a free entry structure for the energy sector, investment subsidies boost investment, while the opposite result emerges under natural monopoly if increasing returns in the energy sector are not strong enough. Keyword Energy-saving technological progress
Vintage capital
Energy market
Natural monopoly
Investment subsidiesJEL E22
O40
Q40Copyright Holder UNU-MERIT Copyright Year 2008 Copyright type All rights reserved ISSN 18719872 -
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