Promoting clean technologies under imperfect competition

Théophile T. Azomahou, Raouf Boucekkine () and Phu Nguyen-Vanc

Working Papers from Business School - Economics, University of Glasgow

Abstract: We develop a general equilibrium multi-sector vintage capital model with 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. The intermediate inputs sector is modelled à la Dixit-Stiglitz (1977). Two polar market structures are considered for the energy market, free entry and natural monopoly. The impact of imperfect competition on the outcomes of the decentralized equilibria are deeply characterized. We identify an original paradox: adoption subsidies may induce a larger investment into cleaner technologies either under free entry or natural monopoly. However, larger diffusion rates do not necessarily mean lower energy consumption at equilibrium, which may explain certain empirical puzzles.

Keywords: Energy-saving technological progress; vintage capital; market imperfections; natural monopoly; investment subsidies (search for similar items in EconPapers)
JEL-codes: E22 O40 Q40 (search for similar items in EconPapers)
Date: 2009-02
New Economics Papers: this item is included in nep-bec, nep-dge, nep-ene, nep-env and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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