This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

American Economic Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

Innovation-Led Transitions in Energy Supply

  • Derek Lemoine
American Economic Journal: Macroeconomics
vol. 16, no. 1, January 2024
(pp. 29–65)
Download Full Text PDF

Abstract

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.

Citation

Lemoine, Derek. 2024. "Innovation-Led Transitions in Energy Supply." American Economic Journal: Macroeconomics, 16 (1): 29–65. DOI: 10.1257/mac.20200369

Additional Materials

JEL Classification

  • H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
  • O31 Innovation and Invention: Processes and Incentives
  • O33 Technological Change: Choices and Consequences; Diffusion Processes
  • Q35 Hydrocarbon Resources
  • Q41 Energy: Demand and Supply; Prices
  • Q54 Climate; Natural Disasters and Their Management; Global Warming
There are no comments for this article.
Login to Comment