EconPapers    
Economics at your fingertips  
 

To Build or not to Build? Capital Stocks and Climate Policy

Elizabeth Baldwin (), Yongyang Cai () and Karlygash Kuralbayeva

No 204, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: We investigate how irreversibility in “dirty” and “clean” capital stocks affectsoptimal climate policy, from both theoretical and numerical perspectives. An increasing carbon tax will reduce investments in assets that pollute, and so reduce emissions in the short term: our “irreversibility effect”. As such the “Green Paradox” has a converse if we focus on demand side capital stock effects. We also show that the optimal subsidy increases with the deployment rate: our “acceleration effect”. Considering second-best settings, we show that, although carbon taxes achieve stringent targets more efficiently, infact renewable subsidies deliver higher welfare when policy is more mild.

Keywords: Infrastructure; Clean and Dirty Energy Inputs; Renewable Energy; Stranded Assets; Carbon Budget; Climate Change Policies; Green Paradox (search for similar items in EconPapers)
JEL-codes: O44 Q54 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-env
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
https://www.economics.ox.ac.uk/materials/OxCarre/R ... oxcarrerp2018204.pdf (application/pdf)

Related works:
Working Paper: To Build or Not to Build? Capital Stocks and Climate Policy (2018) Downloads
Working Paper: To build or not to build? Capital stocks and climate policy (2018) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oxf:oxcrwp:204

Access Statistics for this paper

More papers in OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford Contact information at EDIRC.
Bibliographic data for series maintained by Melis Boya ().

 
Page updated 2019-10-18
Handle: RePEc:oxf:oxcrwp:204