The effectiveness of policies to reduce the use of energy depend on the elasticity of substitution between the various inputs and on the rate of technological progress. This paper presents a theoretical model emphasising energy investments\' characteristics of uncertainty and irreversibility...

This paper presents a theoretical model emphasising energy investments’ characteristics of uncertainty and irreversibility. The theoretical model suggests threshold effects. Firms are induced to substitute away from energy only if prices of energy exceed a certain threshold level and they...

Theory predicts that the presence of fixed costs affects the relationship between energy use and energy price changes, as the firm's output and investment decisions respond differently to energy price increases and decreases. The asymmetry in response to energy price changes is exacerbated by...