Economic growth and the transition from non-renewable to renewable energy

Alfred Greiner, Lars Gruene and Willi Semmler

Environment and Development Economics, 2014, vol. 19, issue 4, 417-439

Abstract: The paper considers the transition of an economy from non-renewable to renewable energy. We set up a canonical growth model with damages in the household's welfare function and two energy sources – non-renewable and renewable energy. To produce renewable energy a capital stock must be built up. A socially optimal solution is considered that takes into account the negative externality from the non-renewable energy. We also study how the optimal solution can be mimicked in a market economy by policies using subsidies and tax rates. To solve the model numerically, we use Nonlinear Model Predictive Control. We study when a transition to renewable energy takes place and whether it occurs before the non-renewable resource is exhausted. In addition, we analyze the impact of the initial values of the non-renewable resource and of the capital stock on the time of paths of the variables.

Date: 2014
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Citations: View citations in EconPapers (15)

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Working Paper: Economic Growth and the Transition from Non-Renewable to Renewable Energy (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:endeec:v:19:y:2014:i:04:p:417-439_00

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