Innovation-Led Transitions in Energy Supply

Derek Lemoine

American Economic Journal: Macroeconomics, 2024, vol. 16, issue 1, 29-65

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.

JEL-codes: H23 O31 O33 Q35 Q41 Q54 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Working Paper: Innovation-Led Transitions in Energy Supply (2017)
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DOI: 10.1257/mac.20200369

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