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Climate Change, Directed Innovation, and Energy Transition: The Long-run Consequences of the Shale Gas Revolution

Author

Listed:
  • Daron Acemoglu

    (Massachusetts Institute of Technology)

  • David Hemous

    (University of Zurich)

  • Lint Barrage

    (Brown University)

  • Philippe Aghion

    (LSE)

Abstract

The shale gas revolution can potentially reduce CO2 emissions in the short-run in countries which depend heavily on coal. Yet, it may also discourage innovation in green technologies, leading to lower emissions in the long-run. We document that the shale gas revolution was accompanied by a collapse in innovation in green electricity. We build a model of directed technical change where energy is produced using coal, and/or natural gas, and/or a green source of energy. We derive conditions under which, as a result of the above trade-off, the shale gas revolution reduces emissions in the short-run but increases emissions in the long-run. We then use data on electricity production to calibrate the model.

Suggested Citation

  • Daron Acemoglu & David Hemous & Lint Barrage & Philippe Aghion, 2019. "Climate Change, Directed Innovation, and Energy Transition: The Long-run Consequences of the Shale Gas Revolution," 2019 Meeting Papers 1302, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:1302
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    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • 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

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