Capital Malleability and the Macroeconomic Costs of Climate Policy

Elisa Lanzi and Ian Sue Wing

No 59476, Sustainable Development Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: This paper argues for introducing the role of capital malleability into the analysis of environmental policies. The issue is explored by means of a theoretical model, a numerical analysis and a computable general equilibrium (CGE) model. Considering the three approaches together is fundamental in obtaining theory-compatible policy-relevant results. The model outcomes reveal differences between results under separate assumptions regarding the malleability of capital. When capital is imperfectly malleable a carbon policy is less effective than under the assumption of perfect malleability of capital. Therefore, it is important that, especially for the analysis of short-term environmental regulations, the issue of capital malleability is taken into consideration.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 47
Date: 2010-02
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https://ageconsearch.umn.edu/record/59476/files/NDL2010-019.pdf (application/pdf)

Related works:
Working Paper: Capital Malleability and the Macroeconomic Costs of Climate Policy (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemdp:59476

DOI: 10.22004/ag.econ.59476

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