Environmental and Resource Economics

, Volume 49, Issue 2, pp 217–241 | Cite as

Distorted Time Preferences and Time-to-Build in the Transition to a Low-Carbon Energy Industry

Article

Abstract

We study the welfare-theoretic consequences of diverging social and private time-preference rates and time-to-build for the transition to a low-carbon energy industry. We show that time-to-build, a prevalent characteristic of capital accumulation in the energy sector, amplifies the distortion induced by the split discount rates. Thus, these two characteristics create in a mutually reinforcing way less favorable circumstances for the introduction of new clean energy technologies as compared to the social optimum, even if welfare losses from emissions are internalized. We discuss resulting policy implications with particular emphasis on the energy sector.

Keywords

Discounting Distorted time preferences Energy industry Environmental and technology policy Technological transition Time-to-build 

JEL Classification

Q48 H23 H43 

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Copyright information

© Springer Science+Business Media B.V. 2010

Authors and Affiliations

  1. 1.Toulouse School of Economics (LERNA)ToulouseFrance
  2. 2.Department of Economics and Oeschger Centre for Climate Change ResearchUniversity of BernBernSwitzerland

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