Six essays on the transition to clean capital

This thesis shows that while greenhouse gases are a stock pollution that translate into an increasing shadow carbon price, it may be socially desirable to invest now in the deployment of expensive emission-reduction measures, in particular in the sectors that are more difficult to de-carbonize. This results solely from taking into account inertia in the accumulation of low-carbon capital, absent any other market imperfection. In this framework, the key is to make sure that short-term abatement investment in consistent with long-term emission-reduction objectives. For instance, when computing the marginal abatement cost of replacing coal plants with gas or renewable power, one should take into account that only renewable power can lead to the full decarbonization of the power sector. Similarly, the appraisal of electric vehicles should acknowledge that climate stabilization requires zero carbon electricity anyway. This thesis also covers the choice of policy instruments that imperfect governments can use to make sure that the market implements these investments. It suggests that if governments cannot commit credibly to a carbon price path, or cannot fully compensate those who lose because of the carbon price, then sector-scale policy instruments that incentivize investment in clean capital may be more effective (but not necessarily more efficient) and more acceptable than the carbon price. For instance a feebate in favor of cleaner personal vehicles does not require the government to commit to a carbon price over the lifetime of that vehicles to be effective, and avoids creating stranded assets among exiting inefficient vehicles. (author)