The optimal timing of adoption of a green technology

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)

Abstract

We study the optimal timing of adoption of a cleaner technology and its effects on the rate of growth of an economy in the context of an AK endogenous growth model. We show that the results depend upon the behavior of the marginal utility of environmental quality with respect to consumption. When it is increasing, we derive the capital level at the optimal timing of adoption. We show that this capital threshold is independent of the initial conditions on the stock of capital, implying that capital-poor countries tend to take longer to adopt. Also, country-specific characteristics, as the existence of high barriers to adoption, may lead to different capital thresholds for different countries. If the marginal utility of environmental quality decreases with consumption, a country should never delay adoption; the optimal policy is either to adopt immediately or, if adoption costs are "too high", to never adopt. The policy implications of these results are discussed in the context of the international debate surrounding the environmental political agenda.

Original languageEnglish
Pages (from-to)35-55
Number of pages21
JournalEnvironmental and Resource Economics
Volume36
Issue number1
DOIs
Publication statusPublished - 1 Jan 2007

Keywords

  • Cost of adoption
  • Growth
  • Optimal timing of adoption
  • Pollution
  • Technology adoption

Fingerprint

Dive into the research topics of 'The optimal timing of adoption of a green technology'. Together they form a unique fingerprint.

Cite this