Innovation-Led Transitions in Energy Supply

64 Pages Posted: 24 May 2017

See all articles by Derek Lemoine

Derek Lemoine

University of Arizona - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2017

Abstract

I generalize a benchmark model of directed technical change in order to reconcile it with the historical experience of energy transitions. I show that the economy becomes increasingly locked-in to the dominant energy source when machines and energy resources are substitutes, but a transition away from the dominant energy source is possible when machines and energy resources are complements. Consistent with history, a transition in research activity leads any transition in resource supply. A calibrated numerical implementation shows that innovation is critical to climate change policy. A policymaker uses a temporary research subsidy to permanently redirect innovation towards low-emission resources, avoiding much more warming than would a policymaker restricted to an emission tax instrument.

Suggested Citation

Lemoine, Derek, Innovation-Led Transitions in Energy Supply (May 2017). NBER Working Paper No. w23420. Available at SSRN: https://ssrn.com/abstract=2971817

Derek Lemoine (Contact Author)

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

HOME PAGE: http://www.dereklemoine.com/

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