Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
We develop a theoretical model of directed technical change in which clean (zero-emissions) and dirty (emissions-intensive) technologies are embodied in long-lived capital stocks. Switching from dirty to clean innovation leads to ongoing reductions in the relative costs of producing clean investment goods, making them ever cheaper to purchase and so encouraging clean investment. At the same time, falling replacement costs imply falling asset values. Consequently, continuing innovation in capital-embodied clean technologies also generates obsolescence costs, which are borne by users of clean capital. The negative effect of obsolescence costs on demand for clean investment and consequently on the speed of transition to clean growth has been neglected in the literature on directed technical change.