Template-type: ReDIF-Paper 1.0
Author-Name: Azomahou, Théophile
Author-Email: azomahou@merit.unu.edu
Author-Workplace-Name: UNU-MERIT
Author-Name: Boucekkine, Raouf
Author-Email: boucekkine@core.ucl.ac.be
Author-Workplace-Name: CORE, Universite Catholique de Louvain
Author-Name: Nguyen-Van, Phu 
Author-Email: Phu.Nguyen-Van@u-cergy.fr
Author-Workplace-Name: CNRS, Université de Cergy-Pontoise,
Title: Promoting clean technologies: The energy market structure crucially matters.
Abstract: We develop a general equilibrium vintage capital model with embodied 
	 energy-saving technological progress and an explicit energy market to 
	 study the impact of investment subsidies on investment and output. 
	 Energy and capital are assumed to be complementary in the production 
	 process. New machines are less energy consuming and scrapping is 
	 endogenous. It is shown that the impact of investment subsidies heavily 
	 depends on the structure of the energy market, the mechanism explaining 
	 this outcome relying on the tight relationship between the lifetime of 
	 capital goods and energy prices via the scrapping conditions inherent to 
	 vintage models. In particular, under a free entry structure for the 
	 energy sector, investment subsidies boost investment, while the opposite 
	 result emerges under natural monopoly if increasing returns in the 
	 energy sector are not strong enough.
Classification-JEL: E22, O40, Q40 
Keywords: Energy-saving, Technological change, Vintage capital, Energy market,
	 Natural monopoly, Investment subsidies
Series: UNU-MERIT Working Papers
Creation-Date: 2008
Number: 032
File-URL: http://www.merit.unu.edu/publications/wppdf/2008/wp2008-032.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2008032