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Distorted Time Preferences and Structural Change in the Energy Industry A Theoretical and Applied Environmental-Economic Analysis

:	Christoph Heinzel
:	Distorted Time Preferences and Structural Change in the Energy Industry A Theoretical and Applied Environmental-Economic Analysis
:	Physica-Verlag
:	9783790821833
:	1
:	CHF 87.20
:

:	Volkswirtschaft
:	English

:	166
:	Wasserzeichen/DRM
:	PC/MAC/eReader/Tablet
:	PDF

The present study is a slightly revised version of my PhD thesis which was accepted at the Economics Department of Dresden University of Technology in July 2008. It has a long and a short history. For it began, as suggested theme, as a fundamental evaluation of evolutionary economics for ecological economics, asking, especially, for what the two ?elds actually constitutes and, eventually, relates. In several years of unfruitful dwelling, however, neither of these two young, non-mainstream ?elds proved as constituted at a fundamental level as yet. Rather, ecological economics, founded at the end of the 1980s as an attempt to combine social and natural s- ence approaches(in particular economics and ecology) to study especially long-run environmental problems in an encompassing manner, has mainly developed into an interdisciplinary research forum on environmental-economicissues. Particularly uni?edbycertainnormativestanc s sharedwithinits community,it constitutes,well understood, a new discpline of its own right, distinct from economics, with its own scienti?c standards, questions, methodologies and institutions (Baumgartner ¨ and Becker 2005). Modern evolutionaryeconomicson the other hand has been a quarter of a century after its inception with Nelson and Winter (1982) still a mainly h- erogeneousendeavor, linked by a (rather amorphous) common interest in economic 'evolution' and a critical stance towards neoclassical mainstream economics, with a certain strength in applied studies on industrial dynamics (Heinzel 2004, 2006).

	Preface	7
	Contents	9
	Acronyms	13
	Chapter 1 Introduction	17
	1.1 Motivation and Research Question	17
	1.2 Analytical Approach	18
	1.3 Main Contribution	19
	1.4 Outline	21
	Part I Theoretical Analysis	23
	Chapter 2 Foundations of the Theoretical Analysis	24
	2.1 Social versus Private Time Preferences	24
	2.1.1 The Economic Discounting Debate: First-best Benchmark, Second-best Cases, and Some More Recent Issues	25
	2.1.2 Three Reasons Particularly Relevant for the Present Analysis	31
	2.1.3 Summary and Treatment of the Assumption in the Model	42
	2.2 Time-Lagged Capital Theory	44
	2.2.1 Its Evolution and the Basic Neo-Austrian Three-process Model	45
	2.2.2 New Extensions	47
	2.3 Analytical Structure of the Model in Chapter 3	47
	2.4 Conclusion	48
	Chapter 3 A Theoretical Model of Structural Change in the Energy Industry	49
	3.1 Model	49
	3.2 Social Optimum	52
	3.2.1 Necessary and Sufficient Conditions for Social Optimum	52
	3.2.2 Conditions for Investment and Replacement	55
	3.3 Unregulated Competitive Market Equilibrium	59
	3.3.1 The Household s Market Decisions	59
	3.3.2 The Firms Market Decisions	60
	3.3.3 Necessary and Sufficient Condition for Unregulated Market Equilibrium	61
	3.3.4 Conditions for Investment and Replacement	62
	3.4 Competitive Market Equilibrium with Emission Tax and Investment Subsidy	65
	3.4.1 The Household s and Firms Market Decisions under Regulation	65
	3.4.2 Necessary and Sufficient Condition for Regulated Market Equilibrium	66
	3.4.3 Conditions for Investment and Replacement	68
	3.5 Conclusion	72
	Chapter 4 Summary of Results, Discussion of Assumptions, and Policy Implications	73
	4.1 Summary of Results	73
	4.1.1 Too Low Unit Costs of Energy of Established Technology as Compared to Social Optimum Due to Pollution	73
	4.1.2 Too High Unit Costs of Energy of New Technology as Compared to Social Optimum Because Private Time-Preference Rate Higher Than Socially Optimal	74
	4.1.3 Time Lag of Capital Accumulation Reinforces Distortion from Split of Social and Private Time-Preference Rates	75
	4.1.4 Distortions Imply in Mutually Reinforcing Way Less Favorable Circumstances for Innovation and Replacement	75
	4.1.5 Social Optimum May Be Implemented by Setting Appropriate Emission Tax and Investment Subsidy	76
	4.1.6 Environmental Policy Alone Biased Towards Gradual Change, Technology Policy Alone Independant of Environmental Effect	76
	4.2 Discussion of Model Assumptions	77
	4.2.1 Social Rate of Time Preference Below Private	77
	4.2.2 Time Lag in Capital Accumulation	77
	4.2.3 Focus on Linear-limitational, General Energy Technologies	78
	4.2.4 Labor Only Primary Input, Energy Homogeneous Output	78
	4.2.5 Emissions as Flow Pollutant	79
	4.2.6 Abstraction from Peculiarities of Economics of Power Systems	79
	4.3 Policy Implications	79
	4.3.1 New Reason for Technology Policy	80
	4.3.2 No Support of Subsidies for Specific Technologies	80
	4.3.3 Necessary Completion of Environmental by Technology Policy	80
	4.3.4 Environmental Policy Alone Favors Gradual Change	81
	4.3.5 Substantiation of Win-win Hypothesis of Environmental Regulation	81
	4.4 Conclusions to Theoretical Part	81
	Part II Applied Analysis	83
	Chapter 5 Foundations of the Applied Analysis	84
	5.1 Analytical Setting and Specifics of the Applied Investigation	84
	5.1.1 Analytical Setting	85
	5.1.2 Focus on Germany Around 2015 and Conventional Generation Technologies	86
	5.1.3 Previous Literature, Contribution, and Data Sources	87
	5.1.4 Relationship to Theoretical Part	90
	5.2 Financial Model	91
	5.2.1 Capital Costs	91
	5.2.2 Costs During Operation	93
	5.2.