This paper uses a Ramsey model with two types of capital to analyze the optimal transition to clean capital when polluting investment is irreversible. The cost of climate mitigation decomposes as a technical cost of using clean instead of polluting capital and a transition cost from the irreversibility of pre-existing polluting capital. With a carbon price, the transition cost can be limited by underutilizing polluting capital, at the expense of a...
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INFORMATION
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2014/05/01
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Document de travail de recherche sur les politiques
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WPS6859
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1
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1
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2014/05/01
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Disclosed
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Transition to clean capital, irreversible investment and stranded assets
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marginal utility of consumption