“Directed technical change with capital-embodied technologies” – article in the Energy Economics

Energy Economics is one of the two most important scientific journals in the field – the impact factor is 3.2. The research summarised in the article “Directed technical change with capital-embodied technologies: Implications for climate policy” by James Lennox (Victoria University, Malbourne, Australia) and Jan Witajewski-Baltvilks (Institute for Structural Research – IBS) was initiated during the researchers collaboration in the Fondazione Eni Enrico Mattei (FEEM) in Milan.

The article notes that when the costs of new technologies (e.g. Renewable Energy Sources) decline at fast rate, rational investors limit their purchases of these technologies because they expect that in the future they will be able to buy them at lower costs. This mechanism implies that the low-carbon transition can be characterized by a larger inertia than the one predicted by the standard economic models. The inertia might have important consequences for climate change mitigation – late adoption of renewable energy sources may lead to dangerously high emission of CO2. In this case the climate policy should be more aggressive.

The article is available on the Science Direct website.