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dc.titleInstrument Choice and Stranded Assets in the Transition to Clean Capital
dc.contributor.authorRozenberg, Julie
dc.contributor.authorVogt-Schilb, Adrien
dc.contributor.authorHallegatte, Stephane
dc.contributor.orgunitClimate Change Solutions Division
dc.date.available2017-03-24T00:00:00
dc.date.issue2017-03-23T00:00:00
dc.description.abstractTo mitigate climate change, some governments opt for instruments focused on investment, like performance standards or feebates, instead of carbon prices. We compare these policies in a Ramsey model with clean and polluting capital, irreversible investment and a climate constraint. Alternative instruments imply different transitions to the same balanced growth path. The optimal carbon price minimizes the discounted social cost of the transition to clean capital, but imposes immediate private costs that disproportionately affect the current owners of polluting capital, in particular in the form of stranded assets. A phased-in carbon price can avoid stranded assets but still result in a drop of income for the owners of polluting capital when it is implemented. Second-best standards or feebates on new investment lead to higher total costs but avoid stranded assets, preserve the revenues of vested interests, and smooth abatement costs over individuals and time. These results suggest a trade-off between political feasibility and cost-effectiveness of environmental policies.
dc.format.extent50
dc.identifier.doihttp://dx.doi.org/10.18235/0011781
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Instrument-Choice-and-Stranded-Assets-in-the-Transition-to-Clean-Capital.pdf
dc.language.isoen
dc.mediumAdobe PDF
dc.publisherInter-American Development Bank
dc.subjectStranded Asset
dc.subjectEnergy Efficiency
dc.subjectGreenhouse Gas Emission
dc.subjectPower Plant
dc.subjectCoal
dc.subjectEnvironmental Tax
dc.subjectEnvironmental Policy
dc.subject.jelcodeL50 - Regulation and Industrial Policy: General
dc.subject.jelcodeO33 - Technological Change: Choices and Consequences • Diffusion Processes
dc.subject.jelcodeO44 - Environment and Growth
dc.subject.jelcodeQ52 - Pollution Control Adoption and Costs • Distributional Effects • Employment Effects
dc.subject.jelcodeQ54 - Climate • Natural Disasters and Their Management • Global Warming
dc.subject.jelcodeQ58 - Government Policy
dc.subject.keywordsclean capital;BIDcambioclima;stranded assets
idb.identifier.pubnumberWorking Papers
idb.operationRG-K1447
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