The general objective of this project was to improve the modelling of the dynamics of innovation and investment in an applied general equilibrium model and to evaluate its impact on the design of energy and environmental policies. The work consisted of three parts, the first two concentrating on model development and the third one on policy analysis. The first part was devoted to the development of the dynamic framework of investment decisions in a general equilibrium model and focused on the vintage of capital and on the intertemporal dimension. A vintage approach for capital was implemented for a better representation of the substitution possibilities between production factors and of embodied and disembodied technical change, assuming putty-clay factor substitution. Regarding the intertemporal dimension of the model, various issues in environmental or energy policy involve policy interference over longer time periods, such as GHG abatement strategies to cope with global warming or direct regulation of energy technologies such as an administered phase-out of nuclear power or a phase-in of renewable energies. A "perfect foresight" dynamic framework was implemented that permits the measurement of transition costs (inter-sectoral and inter-regional adjustments) which can be significant relative to long-term gains. The second part related to model development concentrated on a further endogenisation of technical change and more specifically of disembodied technical change. The question of biased or neutral technical progress were explored. The modelling of technology linked technical progress through learning curves was analysed as well for the electricity sector. In the third part, specific energy and environmental policies were studied using the newly developed model. On the policy side, the project explored these new developments in terms of policy design, more specifically, for different R&D policies and taxation.