This paper investigates the relationship between investment in new and second-hand capital goods and energy intensity. Using a panel dataset of about 4,500 Chilean firms for the period 2001-2007, we find that both types of investment help reducing energy intensity although second-hand machinery has a signicantly lower effect. We conclude that, in order to reduce the energy intensity of the manufacturing sector, policies aiming at overcoming the constraints to new investment should be preferred to those that discourage investment in second-hand machinery (e.g. an import ban).

Stefania Lovo, Michael Gasiorek and Richard Tol

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