Salle 3001

Julien DUBOIS (CREST) “Phasing Out Fossil Fuels: A Theory to Disentangle Transition Forces”

Abstract: Can growth and emission use be decoupled, and if so, through which mechanism? This paper develops a framework in which three forces drive the energy transition: (i) capital installation, where investment in cleaner vintages reduces emission intensity; (ii) Directed Disembodied Technical Change (DDTC), where R&D shifts the production frontier; and (iii) post-installation adjustment, where already-installed capital adapts its emission intensity over time. The third force is typically omitted from the literature, which treats capital as either fully rigid or fully flexible after installation. I capture it explicitly through a parameter θ ∈ [0,1] measuring the intensity of post-installation adjustment frictions, and show this is of first-order importance, both qualitatively and quantitatively. Qualitatively, θ governs how the three forces interact: in particular, DDTC affects capital vintages heterogeneously and can perversely delay the scrapping of emission-intensive machines. Quantitatively, Bayesian estimation on U.S. data (1949-2024) shows that the assumed value of θ alone drives the estimated elasticity of substitution between capital and emissions from near zero to near unity.

Organizer : Suzanne BELLULE