By Christoph Heinzel
This examine contributes to the industrial discounting debate by means of reading the welfare and coverage implications of distorted time personal tastes for personal investments. The research is utilized to the power undefined, the place it truly is of specific significance. within the transition to low-carbon strength new release, distorted time personal tastes are proven to urge an additional distortion, as well as that from the emission externality. Its quantity varies without delay with the time lag in capital accumulation. so as to enforce the socially optimum course, environmental coverage has to be complemented by way of expertise coverage. The theoretical findings are utilized to the impending structural swap within the German electrical energy within the 2010s.
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Additional resources for Distorted Time Preferences and Structural Change in the Energy Industry: A Theoretical and Applied Environmental-Economic Analysis
The following statements are consistent with the whole of the literature consulted. 1). In view of the multitude of different reasons relevant for the split and the to a good part still open state of discussion with respect to causes, an endogenous explanation of the split is avoided. , the public sector (apart from the regulator), financial markets, eventual imperfections of the commodity markets, production externalities, and uncertainty remain exogenous to the analysis. Moreover, the specification of the environmental externality is such that it does not influence the private time preferences.
In order to describe the effect of uncertain growth on the long-term behaviour of the discount rate, Gollier extends the analysis to the second period, with (1+ g1 )(1+ g2 ) − 1 being the growth rate over the two periods. 28) the socially optimal discount rate per period for a cash flow occurring at t = 2 derives as: u (c) (1 + δ2)2 = . 30) implying that δ 2 = δ1 . Thus, for constant relative risk aversion the wealth effect of a longer time horizon just compensates the precautionary effect. e. for all (x1 , x2 ), (x1 , x2 ) ∈ R2+ : 14 26 2 Foundations of the Theoretical Analysis behavior and decreasing relative risk aversion are sufficient, first, for the socially efficient discount rate to stay below that in the case of certain growth, and, second, for the long-term discount rate to be smaller than the short-term one.
The type of a firm is supposed to be uncertain for anyone in the economy until uncertainty is resolved in t = 1. S. 9) percentage points. 4 percentage points. K. which together account for more than 85% of capitalised global equity value (Mehra and Prescott 2003). 20 2 Foundations of the Theoretical Analysis human capital for the economy is h. , non-human) capital relative to the returns to human capital, ν , and the probability of recession, π . In the model three states of the world arise. To the two global states, ‘boom’ (B) and ‘recession’ (R), add, for the case of recession, the two individual states of ‘job’ ( j) and ‘job loss’ (n j): (Bi) boom, occurring with probability 1 − π , (Ri j ) recession without job loss, occurring with probability π (1 − ι ), (Rin j ) recession with job loss, occurring with probability πι .
Distorted Time Preferences and Structural Change in the Energy Industry: A Theoretical and Applied Environmental-Economic Analysis by Christoph Heinzel