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, Phu
    Title 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 subsidies
    JEL E22
    O40
    Q40
    Copyright Holder UNU-MERIT
    Copyright Year 2008
    Copyright type All rights reserved
    ISSN 18719872
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    Created: Wed, 11 Dec 2013, 16:22:53 JST