Energy Transition Under Irreversibility: A Two-Sector Approach

Prudence Dato

Environmental & Resource Economics, 2017, vol. 68, issue 3, No 16, 797-820

Abstract: Abstract This paper analyses the optimal energy transition of a two-sector economy (energy and final goods) under irreversible environmental catastrophe. First, it proposes a general appraisal of optimal switching problems related to energy transition showing: (1) the possibility of a catastrophe due to accumulation of pollution; and (2) technological regimes with the adoption of renewable energy. Second, it numerically shows that for given baseline parameter values, the most profitable energy transition path may correspond to the one in which the economy starts using both resources, crosses the pollution threshold by losing a part of its capital, and never adopts only clean energy. Third, it extends the model to allow for additional investment in energy saving technologies. We then find that this additional investment favours full transition to the sole use of renewable energy. It is then profitable to take advantage of these synergies by jointly promoting deployment of clean energy and providing incentives for investment in energy saving technologies.

Keywords: Energy; Irreversibility; Pollution; Switch (search for similar items in EconPapers)
JEL-codes: C61 Q30 Q53 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10640-016-0053-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Energy transition under irreversibility: a two-sector approach (2015)
Working Paper: Energy transition under irreversibility: a two-sector approach (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:68:y:2017:i:3:d:10.1007_s10640-016-0053-z

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

DOI: 10.1007/s10640-016-0053-z

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().