Innovation-Led Transitions in Energy Supply

Research output: Contribution to journalArticlepeer-review

Abstract

Generalizing models of directed technical change, I show that com-plementarities 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 tran-sitions 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 renew-ables, 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.

Original languageEnglish (US)
Pages (from-to)29-65
Number of pages37
JournalAmerican Economic Journal: Macroeconomics
Volume16
Issue number1
DOIs
StatePublished - 2024

ASJC Scopus subject areas

  • General Economics, Econometrics and Finance

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