Macroeconomic Effects of Green Energy Transition and Capital Replacement

Tasks

Green energy transition is a necessary structural transformation of all economies around the world to sustainably address the issue of climate change and at the center of the policy debate in almost all countries. Green energy transition in the manufacturing sector implies switching from carbon producing energy input such as fossil fuels to zero-carbon/moderately polluting energy inputs. This process affects all the market sectors and the players in each sector of the economy.

The main question of this project is to understand the mechanism of capital replacement necessary for the green energy transition. That is, we aim at estimating the rate of capital replacement and how much this rate depends on green innovation processes as well as how much it responds to carbon taxation or other carbon-reducing policies. This will allow us to quantify the aggregate macroeconomic effects of firm-level decision making with respect to capital replacement as well as its distributional consequences which are of key relevance to policymakers around the globe.