TY  - RPRT
        AU  - Burda, Michael C.
AU  - Goeth, Anna-Maria
AU  - Zessner-Spitzenberg, Leopold
        TI  - Capital Adjustment Costs and Stranded Assets in an Optimal Energy Transition
        PY  - 2025/Dec/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 18356
        UR  - https://www.iza.org/publications/dp18356
        AB  - In the context of a green energy transition, capital adjustment costs render effective substitution between clean and dirty energy sources finite and endogenous, despite infinite long-run substitutability. Ramsey optimal paths robustly frontload clean investment before exhaustion of a given carbon budget, but also generally imply some capital stranding. Along the path of emissions reduction, new investment is quantitatively more important than reduced output or labor redeployment. An ambitious climate goal in our benchmark calibration implies modest levels of stranded capital at 1.5% of GDP, but this rises to more than 7% if implementation is delayed by a decade.
        KW  - capital adjustment costs
KW  - optimal investment
KW  - energy transition
KW  - growth model
KW  - carbon pricing
        ER  -