Rozenberg, JulieVogt-Schilb, AdrienHallegatte, Stephane2014-05-152014-05-152014-05https://hdl.handle.net/10986/18343This 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 loss in the value of polluting assets (stranded assets) and a drop in income. In contrast, policy instruments that focus on redirecting investments -- such as feebates or environmental standards -- prevent underutilization of existing capital, avoid stranded assets, and reduce short-term losses; but they reduce emissions more slowly and increase the intertemporal cost of the transition. The paper investigates inter- and intra-generational distributional impacts and the political acceptability of climate change mitigation policy instruments.en-USCC BY 3.0 IGOABATEMENTABATEMENT COSTABATEMENT COSTSAFFILIATED ORGANIZATIONSALLOCATIONALLOWANCEALLOWANCE ALLOCATIONARBITRAGEASSETSATMOSPHEREATMOSPHERIC CONCENTRATIONCAPITAL COSTSCAPITAL MARKETSCAPITAL PRODUCESCAPITAL STOCKSCARBONCARBON BUDGETCARBON EMISSIONSCARBON INTENSITYCARBON POLICYCARBON PRICECARBON PRICESCARBON TAXCARBON TAXESCLEAN AIRCLEAN ELECTRICITYCLEAN ENERGYCLEAN TECHNOLOGIESCLIMATECLIMATE CHANGECLIMATE CHANGE MITIGATIONCLIMATE DAMAGESCLIMATE OBJECTIVESCLIMATE POLICIESCLIMATE POLICYCOCO2COALCOAL PLANTCOLLECTIVE ACTIONCONCENTRATION CEILINGCONSUMERSCOST OF ABATEMENTCOST OF CARBONDAMAGESDEPRECIATIONDEVELOPMENT POLICYDISCOUNT RATEDISCOUNT RATESDISTRIBUTIONAL IMPACTSECOLOGICAL ECONOMICSECONOMIC CONDITIONSECONOMIC EFFICIENCYECONOMIC GROWTHECONOMICSELASTICITYELASTICITY OF SUBSTITUTIONELECTRICITY PRODUCTIONEMISSIONEMISSION ALLOWANCESEMISSION REDUCTIONSEMISSIONSENERGY ECONOMICSENERGY EFFICIENCYENERGY EFFICIENCY STANDARDSENERGY INFRASTRUCTUREENERGY INTENSITYENERGY POLICYENERGY SAVINGSENERGY USEENVIRONMENTAL ECONOMICSENVIRONMENTAL POLICYEQUILIBRIUMEQUILIBRIUM ANALYSISEXTERNALITIESEXTERNALITYFINANCIAL MARKETSFINANCIAL SUPPORTFUNCTIONAL FORMSGHGGLOBAL EMISSIONSGLOBAL WARMINGGREENHOUSEGREENHOUSE EFFECTGREENHOUSE GASESGREENHOUSE GASES EMISSIONSHUMAN CAPITALINCOMEINCOME EFFECTINTEREST RATEINTERGENERATIONAL EQUITYINVESTMENT BEHAVIORINVESTMENT REGULATIONJOBSLAISSEZ-FAIRELOW-CARBONMARGINAL COSTMARGINAL PRODUCTIVITYMARGINAL UTILITYMARKET FAILUREMULTIPLIERSNEGATIVE EXTERNALITYNOXNUCLEAR POWERPATENTSPERFORMANCE STANDARDPERFORMANCE STANDARDSPOLITICAL ECONOMYPOWER PLANTSPRESENT VALUEPRICE INCREASEPRODUCTION FUNCTIONPROFITABILITYPUBLIC GOODSRATE OF RETURNREBATESREGULATORY CAPTURERELATIVE PRICERESOURCE ECONOMICSSAVINGSSECONDARY MARKETSSHADOW PRICESHADOW PRICESSOCIAL COSTSTRANDED ASSETSSUBSTITUTIONSUBSTITUTION EFFECTTAXTAX REVENUETRADE SYSTEMTRADE-OFFUNEMPLOYMENTUTILITY FUNCTIONUTILITY MAXIMIZATIONVOTERSWEALTHWIND10.1596/1813-9450-6859