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TECHNOLOGICAL CHANGE DURING THE ENERGY TRANSITION

  • Gerard van der Meijden (a1) and Sjak Smulders (a2)
Abstract

The energy transition from fossil fuels to alternative energy sources has important consequences for technological change and resource extraction. We examine these consequences by incorporating a nonrenewable resource and an alternative energy source in a market economy model of endogenous growth through expanding varieties. During the energy transition, technological progress is nonmonotonic over time: It declines initially, starts increasing when the economy approaches the regime shift, and jumps down once the resource stock is exhausted. A moment of peak-oil does no longer necessarily occur, and simultaneous use of the resource and the alternative energy source will take place if the return to innovation becomes too low. Subsidies to research and development (R&D) and to renewables production speed up the energy transition, whereas a tax on fossil fuels postpones the switch to renewable energy.

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Corresponding author
Address correspondence to: Gerard van der Meijden, Department of Spatial Economics, Vrije Universiteit Amsterdam, De Boelelaan 1105, 1081 HV, Amsterdam, The Netherlands; e-mail: g.c.vander.meijden@vu.nl.
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We would like to thank Reyer Gerlagh, Jenny Ligthart, Rick van der Ploeg, Hiroaki Sakamoto, Ralph Winter, Cees Withagen, Aart de Zeeuw, and conference participants in Paris, Ascona, Prague, and Venice for helpful comments. We gratefully acknowledge financial support from FP7-IDEAS-ERC Grant No. 269788.

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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
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