FEEM working papers "Note di lavoro"
2015.002
Date: 20/1/2015

Capital-embodied Technologies in CGE Models


Authors:

James Lennox (Fondazione Eni Enrico Mattei); Ramiro Parrado (Fondazione Eni Enrico Mattei, Centro Euro-Mediterraneo sui Cambiamenti Climatici)

JEL n.: O33, O44, Q54, Q55, Q58
Keywords: Climate Change Mitigation, Capital-Embodiment, Technological Change, CGE Models

Abstract

Computable general equilibrium (CGE) models are widely used to analyse macroeconomic and sectoral effects of climate policies. Developing new and improving existing carbon-free energy technologies will be crucial to limit the long-term economic costs of mitigation policies. Such technologies are largely embodied in capital goods; yet conventionally structured CGE models cannot capture capital-embodiment of sector-specific technologies. In this paper, we clarify the conceptual nature of the capital embodiment problem in multisector CGE models. Aggregating productive sectors and investment goods eliminates channels whereby specific technological changes are embodied in specific capital stocks. Nevertheless, capital-embodiment of sector-specific Hicks-neutral technical changes can be directly represented as investment-specific technical change (ISTC).

***
Suggested citation:  Lennox, J., R. Parrado, (2015), 'Capital-embodied Technologies in CGE Models', Nota di Lavoro 2.2015, Milan, Italy: Fondazione Eni Enrico Mattei.

Download file
Download PDF file

FEEM Newsletter & Update

Subscribe to stay connected.

Your personal data will be processed by Fondazione Eni Enrico Mattei. – data Controller – with the aim of emailing the FEEM newsletter & Update. The use of Your email address is necessary for the implementation of the newsletter service. You are invited to read the Privacy Policy in order to obtain additional information about the protection of Your rights.

This Website uses technical cookies and cookie analytics, as well as “third party” profiling cookies.
If you close this banner or you decide to continue navigating on this Website, you express consent to the use of cookies. If you need additional information or you wish to express selective choices on the use of cookies, please refer to the   Cookie PolicyI agree