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,
economically,
pricing,
consumption,
emission,
electricity,
energy prices,
energy,
epa,
energy efficiency,
electricity prices,
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Census of Manufactures,
Annual Survey of Manufactures,
Center for Economic Studies,
Ordinary Least Squares,
Cobb-Douglas,
Energy Information Administration,
Federal Reserve Bank,
Longitudinal Business Database,
Manufacturing Energy Consumption Survey,
Environmental Protection Agency,
Census of Manufacturing Firms,
Generalized Method of Moments,
North American Industry Classification System,
American Community Survey,
European Union,
Census Bureau Disclosure Review Board,
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State Energy Data System,
Federal Statistical Research Data Center
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