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Innovation-Led Transitions in Energy Supply

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  • Derek Lemoine

Abstract

Generalizing models of directed technical change, I show that complementarities between innovations and factors of production (here energy resources) can drive transitions away from a dominant sector. In a calibrated numerical implementation, the economy gradually transitions energy supply from coal to gas and then to renewable energy even in the absence of policy. The welfare-maximizing tax on carbon emissions is J-shaped, immediately redirects most research to renewables, and rapidly transitions energy supply directly to renewables. The emission tax is twice as valuable as either the welfare-maximizing research subsidy or the welfare-maximizing mandate to use renewable resources.

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  • Derek Lemoine, 2017. "Innovation-Led Transitions in Energy Supply," NBER Working Papers 23420, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23420
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    3. David Popp, 2019. "Environmental Policy and Innovation: A Decade of Research," NBER Working Papers 25631, National Bureau of Economic Research, Inc.
    4. Ara Jo & Alena Miftakhova, 2022. "How Constant is Constant Elasticity of Substitution? Endogenous Substitution between Clean and Dirty Energy," CER-ETH Economics working paper series 22/369, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    5. Wagener, Florian & de Zeeuw, Aart, 2021. "Stable partial cooperation in managing systems with tipping points," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    6. Jo, Ara & Miftakhova, Alena, 2024. "How constant is constant elasticity of substitution? Endogenous substitution between clean and dirty energy," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    7. Ara Jo & Christos Karydas, 2023. "Firm Heterogeneity, Industry Dynamics and Climate Policy," CER-ETH Economics working paper series 23/378, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    8. David Popp, 2019. "Environmental policy and innovation: a decade of research," CESifo Working Paper Series 7544, CESifo.
    9. Zhu, Zhishuang & Liao, Hua & Liu, Li, 2021. "The role of public energy R&D in energy conservation and transition: Experiences from IEA countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 143(C).
    10. Wiskich, Anthony, 2024. "A carbon tax versus clean subsidies: Optimal and suboptimal policies for the clean transition," Energy Economics, Elsevier, vol. 132(C).
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    12. Wiskich, Anthony, 2021. "A comment on innovation with multiple equilibria and "The environment and directed technical change"," Energy Economics, Elsevier, vol. 94(C).

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    More about this item

    JEL classification:

    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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