Heterogeneous capital stocks and the optimal timing for CO2 abatement

Some recent research suggests benefits to a delayed CO2 emission reduction strategy. If the target level of atmospheric CO2 concentration can be achieved in spite of delay, several factors suggest economic benefits to a delay strategy. However, the analyses that lead to these conclusions typically ignore or underestimate the significant heterogeneity in the turnover rate of society’s capital stock. This research explores the relationship between the turnover rate of capital stocks and the delay decision using a model and empirically estimated abatement costs. The results suggest that under many different assumptions, an early start at CO2 abatement for long-lived capital stocks would be economically optimal. # 2006 Elsevier B.V. All rights reserved. JEL classification: Q48