Innovation-Led Transitions in Energy Supply

89 Pages Posted: 24 May 2017 Last revised: 30 Dec 2021

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


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.

Suggested Citation

Lemoine, Derek, Innovation-Led Transitions in Energy Supply (May 2017). NBER Working Paper No. w23420, Available at SSRN:

Derek Lemoine (Contact Author)

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States


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