Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation

Gregory Casey

The Review of Economic Studies, 2024, vol. 91, issue 1, 192-228

Abstract: I develop a directed technical change model of economic growth and energy efficiency in order to study the impact of climate change mitigation policies on energy use. I show that the standard Cobb–Douglas production function used in the environmental macroeconomics literature overstates the reduction in cumulative energy use that can be achieved with a given path of energy taxes. I also show that, in the model, the government combines energy taxes with research and development (R&D) policy that favors output-increasing technology—rather than energy efficiency technology—to maximize welfare subject to a constraint on cumulative energy use. In addition, I study energy use dynamics following sudden improvements in energy efficiency. Exogenous shocks that increase energy efficiency also decrease the incentive for subsequent energy efficiency R&D and increase long-run energy use relative to a world without the original shock. Subsidies for energy efficiency R&D, however, permanently alter R&D incentives and decrease long-run energy use.

Keywords: Energy; Climate change; Directed technical change; Growth (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation (2022)
Working Paper: Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation (2019)
Working Paper: Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation (2017)
Working Paper: Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:91:y:2024:i:1:p:192-228.

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