Optimal Allocation Of Low-carbon Technology Investment

With the rapid growth of economy, the energy consumption of China is increasing rapidly. In 2015, China is the largest primary energy consumer in the world, accounting for 23% of the world’s total consumption. And the emissions of carbon dioxide caused by energy consumption is also becoming more and more attention by people. In the meantime, China is the biggest emitter of carbon dioxide now and it faces enormous environmental pressure. Against such backgrounds, low-carbon technology investment is an important way to reduce energy intensity, wherein cross-border externalities attract great attention.In this study, we develop the model with endogenous low-carbon technology investment, and analyze the effects of low-carbon technology investment on energy consumption in three cases. The three cases include case of endogenous low-carbon technology investment in one economy, case of exogenous low-carbon technology investment within two economies and case of endogenous low-carbon technology investment within two economies. Then, we confirm the existence and specific forms of cross-border externalities, caused by low-carbon technology investment. Finally, we conclude that the low-carbon technology investment is inefficient to reduce energy consumption on case of endogenous low-carbon technology investment in one economy and case of exogenous low-carbon technology investment within two economies. By contrast, low-carbon technology investment becomes effective, when the case is endogenous low-carbon technology investment within two economies. There are some driving factors affecting, including the output elasticity of low-carbon technology investment, the proportion of low-carbon technology investment and the elasticity of supply of energy.