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Environmental and Resource Economics

, Volume 39, Issue 4, pp 411–432 | Cite as

Optimal compliance with emission constraints: dynamic characteristics and the choice of technique

  • Ralph Winkler
Article

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 Dynamic characteristics Emission targets Environmental policy Optimal structural change Replacement of energy techniques Static versus dynamic efficiency Time-lagged dynamic optimization 

JEL-Classification

Q48 Q53 C61 

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Copyright information

© Springer Science+Business Media B.V. 2007

Authors and Affiliations

  1. 1.CER-ETH—Center of Economic Research at ETH ZurichZurichSwitzerland

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