Adjustment time, capital malleability, and policy cost

Joint Program Reprint • Journal Article
Adjustment time, capital malleability, and policy cost
Jacoby, H.D. and I. Sue Wing (1999)
Energy Journal Special Issue: The Costs of the Kyoto Protocol: A Multi-Model Evaluation, pp. 73-92

Reprint 1999-5 [Download]

Abstract/Summary:

The cost of meeting Kyoto-style emissions reductions is heavily dependent on the malleability of an economy's stock of capital and the number of years available for adjustment. Each year of delay introduces more emission-producing activities that must be squeezed out of the system and shortens the time horizon for change, raising the carbon price required to produce the needed changes in capital structure. The MIT Emissions Prediction and Policy Assessment model is used to explore the effects of uncertainty in the degree of capital malleability in the short run, and to analyze how implied carbon prices vary depending on the time of credible commitment to emissions targets.

© 1999 International Association for Energy Economics

Citation:

Jacoby, H.D. and I. Sue Wing (1999): Adjustment time, capital malleability, and policy cost. Energy Journal Special Issue: The Costs of the Kyoto Protocol: A Multi-Model Evaluation, pp. 73-92 (http://www.iaee.org/en/publications/kyoto-pr.aspx)
  • Joint Program Reprint
  • Journal Article
Adjustment time, capital malleability, and policy cost

Jacoby, H.D. and I. Sue Wing

Abstract/Summary: 

The cost of meeting Kyoto-style emissions reductions is heavily dependent on the malleability of an economy's stock of capital and the number of years available for adjustment. Each year of delay introduces more emission-producing activities that must be squeezed out of the system and shortens the time horizon for change, raising the carbon price required to produce the needed changes in capital structure. The MIT Emissions Prediction and Policy Assessment model is used to explore the effects of uncertainty in the degree of capital malleability in the short run, and to analyze how implied carbon prices vary depending on the time of credible commitment to emissions targets.

© 1999 International Association for Energy Economics