Code and Data for: Self-fulfilling Prophecies in the Transition to Clean Technology

Principal Investigator(s):  View help for Principal Investigator(s) Sophie Zhou, University of Reading; Sjak Smulders, Tilburg University

Version:  View help for Version V1

Name File Type Size Last Modified
  data 02/11/2026 06:44:AM
DTC_CarbonPlusIndustry.m text/x-objcsrc 4.5 KB 10/01/2025 12:32:PM
DTC_DiffEqs.m text/x-matlab 10.8 KB 10/01/2025 12:32:PM
DTC_FindEquilibria.m text/x-matlab 5.9 KB 10/01/2025 12:32:PM
DTC_Industry.m text/x-objcsrc 3.2 KB 10/01/2025 12:32:PM
DTC_LaissezFaire.m text/x-objcsrc 4.4 KB 10/01/2025 12:32:PM
DTC_Parameters.m text/x-objcsrc 2.7 KB 10/01/2025 12:32:PM
DTC_Steadystates.m text/x-objcsrc 1.8 KB 10/01/2025 12:32:PM
DTC_WelfareCompute.m text/x-objcsrc 1.5 KB 10/01/2025 12:32:PM
DTC_fct_findtau.m text/x-matlab 438 bytes 10/01/2025 12:32:PM

Project Citation: 

Zhou, Sophie, and Smulders, Sjak. Code and Data for: Self-fulfilling Prophecies in the Transition to Clean Technology. Nashville, TN: American Economic Association [publisher], 2026. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2026-04-02. https://doi.org/10.3886/E238528V1

Project Description

Summary:  View help for Summary
Technological lock-in has been a standard explanation for the slow take-off of clean innovation, but is hard to reconcile with forward-looking investors who anticipate the eventual switch to clean technologies. We provide an alternative explanation: strategic investment complementarities shape innovation and self-fulfilling prophecies can lead to delayed low-carbon transition. We analyze a standard directed technical change model with clean and dirty inputs. We find that when the two are good substitutes, two stable steady states can co-exist, each allowing multiple transitional paths. Optimal low-carbon transition requires a Pigouvian tax rule combined with a coordination device; commitment to a Pigouvian tax trajectory cannot solve a coordination failure.

Scope of Project

Subject Terms:  View help for Subject Terms [directed technical change; , strategic complementarity; , multiple equilibria; , delayed low-carbon transition; , stranded asset; ]
JEL Classification:  View help for JEL Classification
      C62 Existence and Stability Conditions of Equilibrium
      O33 Technological Change: Choices and Consequences; Diffusion Processes
      O38 Technological Change: Government Policy
      O44 Environment and Growth
      Q55 Environmental Economics: Technological Innovation
Geographic Coverage:  View help for Geographic Coverage World
Time Period(s):  View help for Time Period(s) 2019 – 2060


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V1 [2026-04-02]

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