Arbeitspapier
Instrument choice and stranded assets in the transition to clean capital
To mitigate climate change, some governments opt for instruments focused on investment, like performance standards or feebates, instead of carbon prices. We compare these policies in a Ramsey model with clean and polluting capital, irreversible investment and a climate constraint. Alternative instruments imply different transitions to the same balanced growth path. The optimal carbon price minimizes the discounted social cost of the transition to clean capital, but imposes immediate private costs that disproportionately affect the current owners of polluting capital, in particular in the form of stranded assets. A phased-in carbon price can avoid stranded assets but still result in a drop of income for the owners of polluting capital when it is implemented. Second-best standards or feebates on new investment lead to higher total costs but avoid stranded assets, preserve the revenues of vested interests, and smooth abatement costs over individuals and time. These results suggest a trade-off between political feasibility and cost-effectiveness of environmental policies.
- Language
-
Englisch
- Bibliographic citation
-
Series: IDB Working Paper Series ; No. IDB-WP-782
- Classification
-
Wirtschaft
Regulation and Industrial Policy: General
Technological Change: Choices and Consequences; Diffusion Processes
Environment and Growth
Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
Climate; Natural Disasters and Their Management; Global Warming
Environmental Economics: Government Policy
- Subject
-
public acceptability
policy instrument
climate change
intergenerational equity
energy efficiency standards
mothballing
early-scrapping
premature retirement
- Event
-
Geistige Schöpfung
- (who)
-
Rozenberg, Julie
Vogt-Schilb, Adrien
Hallegatte, Stephane
- Event
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Veröffentlichung
- (who)
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Inter-American Development Bank (IDB)
- (where)
-
Washington, DC
- (when)
-
2017
- DOI
-
doi:10.18235/0000643
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Rozenberg, Julie
- Vogt-Schilb, Adrien
- Hallegatte, Stephane
- Inter-American Development Bank (IDB)
Time of origin
- 2017
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