Fossil Fuels, Alternative Energy and Economic Growth

Raul Barreto

No 2014-03, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: We present a theoretical framework that incorporates energy within an endogenous growth model. The model explicitly allows for the interaction and substitution between fossil fuels, defined as a non-renewable resource derived from some fixed initial stock, and alternative energy, defined as renewable resource whose production requires capital input. The dynamics of the model depict a unique balance growth to a saddle point. The consumption path temporarily peaks, when fossil fuels are plentiful and cheap, followed by a fall, as fossil fuel become more scarce and alternative energy production has yet to take over, until finally the steady state is reached where alternative energy production fuels the entire economy. The model depicts a sort of energy heyday when fossil fuels are still plentiful and cheap. As oil stocks fall, alternative energy sources become ever more viable until the day in the future when alternative energy has almost completed replaced oil. Whether or not the peak oil type picture of consumption the model depicts actually represents a sort of energy rich heyday depends analytically on the productivity differential between alternative energy and fossil fuels now and in the future.

Keywords: Endogenous growth; non-renewable resources; renewable resources; energy; oil; fossil fuels; alternative energy; peak oil (search for similar items in EconPapers)
JEL-codes: O41 Q21 Q31 (search for similar items in EconPapers)
Pages: 43 pages.
Date: 2013-04
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Fossil fuels, alternative energy and economic growth (2018)
Working Paper: Fossil fuels, alternative energy and economic growth (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:adl:wpaper:2014-03

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