Capital Malleability and the Macroeconomic Costs of Climate Policy

Elisa Lanzi and Ian Sue Wing
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Ian Sue Wing: Dept. of Geography & Environment, Boston University and Joint Program on the Science & Policy of Global Change, MIT

No 2010.19, Working Papers from Fondazione Eni Enrico Mattei

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: General Equilibrium; CGE Models; Climate Change Policy (search for similar items in EconPapers)
JEL-codes: C68 D58 H22 Q43 (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-cmp, nep-ene, nep-env and nep-reg
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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:fem:femwpa:2010.19

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