Technology Lock-In and Costs of Delayed Climate Policy
July 2023
Working Paper Number:
CES-23-33
Abstract
This paper studies the implications of current energy prices for future energy efficiency and climate policy. Using U.S. Census microdata and quasi-experimental variation in energy prices, we first show that manufacturing plants that open when electricity prices are low consume more energy throughout their lifetime, regardless of current electricity prices. We then estimate that a persistent bias of technological change toward energy can explain the long-term effects of entry-year electricity prices on energy intensity. Overall, this 'technology lock-in' implies that increasing entry-year electricity prices by 10% would decrease a plant's energy intensity of production by 3% throughout its lifetime.
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demand,
exogeneity,
market,
economist,
econometric,
macroeconomic,
efficiency,
expenditure,
fuel,
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pricing,
consumption,
emission,
electricity,
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