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TECHNOLOGICAL CHANGE DURING THE ENERGY TRANSITION

Published online by Cambridge University Press:  15 June 2017

Gerard van der Meijden  and
Sjak Smulders
Gerard van der Meijden*
Affiliation:
Vrije Universiteit Amsterdam and Tinbergen Institute
Sjak Smulders
Affiliation:
Tilburg University and CESifo
*
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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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.

Keywords

Alternative Energy SourcesEndogenous GrowthEnergy TransitionNonrenewable ResourcesTechnological Change
Type
Articles
Information
Macroeconomic Dynamics , Volume 22 , Issue 4 , June 2018 , pp. 805 - 836
Copyright
Copyright © Cambridge University Press 2017 

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Footnotes

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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