Optimal Compliance With Emission Constraints: Dynamic Characteristics and the Choice of Technique

38 Pages Posted: 13 Jan 2008 Last revised: 22 Aug 2008

Ralph Winkler

University of Bern - Department of Economics; University of Bern - Oeschger Centre for Climate Change Research

Date Written: March 2007

Abstract

The paper analyzes how to comply with an emission constraint, which restricts the use of an established energy technique, given the two options to save energy and to invest in two alternative energy techniques. These techniques differ in their deterioration rates and the investment lags of the corresponding capital stocks. Thus, the paper takes a medium-term perspective on climate change mitigation, where the time horizon is too short for technological change to occur, but long enough for capital stocks to accumulate and deteriorate. It is shown that, in general, only one of the two alternative techniques prevails in the stationary state, although, both techniques might be utilized during the transition phase. Hence, while in a static economy only one technique is efficient, this is not necessarily true in a dynamic economy.

Keywords: climate change mitigation, emission targets, environmental policy, replacement of energy techniques

JEL Classification: Q48, Q53, C61

Suggested Citation

Winkler, Ralph, Optimal Compliance With Emission Constraints: Dynamic Characteristics and the Choice of Technique (March 2007). Environmental and Resource Economics, Vol. 39, pp. 411-432, 2008. Available at SSRN: https://ssrn.com/abstract=1082841

Ralph Winkler (Contact Author)

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, 3001
Switzerland
+41 31 631 4508 (Phone)

HOME PAGE: http://www.ralph-winkler.de

University of Bern - Oeschger Centre for Climate Change Research ( email )

Zähringerstrasse 25
Bern, 3012
Switzerland

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