The role of environmental and technology policies in the transition to a low-carbon energy industry

Christoph Heinzel and Ralph Winkler

In a dynamic general equilibrium model we study the interplay between gradual and structural change in the transition to a low-carbon energy industry. We focus on the welfare-theoretic consequences of diverging social and private rates of time preference and a time-to-build feature in capital accumulation. Both features are particularly important in the transformation of energy systems. We show that only a combination of environmental and technology policies can achieve a socially optimal transition. We thus provide a new reason for environmental regulation to be complemented by technology policy such as a non-distortionary investment subsidy.

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Year of publication:	[2007]
Authors:	Heinzel, Christoph ; Winkler, Ralph
Publisher:	Zurich : CER-ETH - Center of Economic Research at ETH Zurich
Subject:	environmental and technology policy \| social vs. individual rates of time preference \| time to build \| gradual vs. structural technological change \| energy industry \| time-to-build \| Umweltpolitik \| Environmental policy \| Technologiepolitik \| Technology policy \| Strukturwandel \| Structural change \| Elektrizitätswirtschaft \| Electric power industry \| Technischer Fortschritt \| Technological change \| Intertemporale Entscheidung \| Intertemporal choice \| Wirkungsanalyse \| Impact assessment \| Dynamisches Gleichgewicht \| Dynamic equilibrium \| Theorie \| Theory