Sensitivity of Energy System Investments to Policy Regulation Changes: Application of the Blue Sky Catastrophe

23 Pages Posted: 16 May 2017

See all articles by Anton A. Bondarev

Anton A. Bondarev

WWZ Universität Basel

Hannes Weigt

University of Basel - Center for Economic Science

Date Written: May 11, 2017

Abstract

In this paper we argue, that the interaction of technology and economic policy regulations in the energy sector may be described by the so-called slow-fast class of dynamical systems. It is known that such systems may exhibit the blue sky catastrophe, a special type of bifurcation. Application of this result allows us to argue that caution is needed when updating economic policies in the energy sector to avoid the onset of catastrophic developments in the system's transformation, when energy system dynamics becomes unresponsive to policy updates.

Keywords: energy infrastructure, investments cycle, economic policy, slow-fast systems, blue sky catastrophe

JEL Classification: L51, L94, Q48, C6, C02

Suggested Citation

Bondarev, Anton A. and Weigt, Hannes, Sensitivity of Energy System Investments to Policy Regulation Changes: Application of the Blue Sky Catastrophe (May 11, 2017). Available at SSRN: https://ssrn.com/abstract=2968230 or http://dx.doi.org/10.2139/ssrn.2968230

Anton A. Bondarev

WWZ Universität Basel ( email )

Basel, 4051
Switzerland

Hannes Weigt (Contact Author)

University of Basel - Center for Economic Science ( email )

Basel, 4051
Switzerland

HOME PAGE: http://www.hannesweigt.ch

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