_sector_ represent more than one tenth of total World GHG emissions. These emissions are generated by relatively short-lived end-use equipment (group 1 above), but the demand for transportation, and thus for energy, derives to a large extent from the complementary transportation infrastructure that is in place, and from urban forms induced by it (groups 3 and 4 above). Similarly, direct emissions from the _residential sector_ (which include energy directly consumed by the residential sector for heating, cooking or heating—e.g., coal, biomass, or gas—but excludes the emissions related to electricity or heat consumed by the residential sector and produced off-site) account for more than one twentieth of total World GHG emissions and originate from end-use equipment, but are driven in part by the energy efficiency of buildings and thus by long-lived capital stock (group 3).<sup>9</sup> 7. A second key feature of long-lived capital—particularly the infrastructure component—is the **—**

**_lumpiness of capacity installation_** both at a plant or project level, as well as, at a network / system level. At the level of an individual plant or project, it is well known that capacity installation (entailing high upfront costs) will peak in a fraction of the time period the plant or project will be functioning (plant life) before tapering off, even though output (in the form of services generated by the capacity) and hence emissions associated with those services may follow a smoother expansion path. It is the capacity installation process that locks-in the subsequent emissions expansion path because once capacity is installed, high switching costs<sup>10</sup> determine the emissions path over the full life of the installation.<sup>11</sup>

8. More interestingly, the same dynamics is often encountered at network level (national scale) which we show in this paper through examples with readily available public data. Aggregate investments in networks of long-lived capital stock also tend to be concentrated in time (i.e., are ‘lumpy’). In other words, the capacity of these networks is put in place in relatively short periods of time. Lumpiness might be related to, inter alia, economies of scale in technology provision (as in the French nuclear case, where the program was cost-effective for manufacturers only if a large enough number of plants were built, box 1), distributional considerations (as in the case of the U.S. Interstate Highway, where federal resources might have been more difficult to appropriate if the program had only targeted a few segments in a few States, box 2), or historic and demographic shocks (as in the post-war housing reconstruction in Europe, coupled with rapid population growth, see box 3). However, not all investments in long-lived capital stock are lumpy at the national level (e.g., the French highspeed train example in box 4 below). With readily available data we have not been able to determine whether capacity expansion at the global level is lumpy or not. Our presumption is that it is less so than at the national level.

9. Third, besides having potentially long-lasting implications for GHG emissions, and besides the lumpiness of investment, **systems built around long-lived capital stock also tend to**

> 9 According to the World Resources Institute (2009), 2000 World GHG emissions are 33.2 GtCO2e (excluding emissions from land-use change), of which the electricity & heat sector accounts for 10.3 GtCO2e (31.0%) and the transportation sector for 4.8 GtCO2e (14.6%). Fossil-fuel emissions from the residential sector (excluding consumption of energy from the electricity & heat sector) is estimated at 1.9 GtCO2e (5.6%) (IEA, 2002). The shares of energy production, transportation, and residential use fall to 25.2%, 11.9%, and 4.6% respectively when emissions from land-use change are accounted for.

> 10 In the form of expensive retrofitting or premature retirement.

> 11 Or at least until low-carbon alternatives to the complementary end-use technologies associated with the long-lived infrastructure—e.g., cars for road infrastructure—are introduced, see paragraph 26.

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