Can the Energy Transition Be Smooth?

Jean-François Fagnart () and Marc Germain ()
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Jean-François Fagnart: CEREC, Université Saint-Louis Bruxelles and IRES, UCLouvain.
Marc Germain: EQUIPPE, Université de Lille 3 and IRES, UCLouvain

No 2015.04, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: We analyse the transition of a decentralized economy whose energy supply switches progressively from non-renewable (NRE) to renewable energy (RE) sources. The two energies are perfect substitutes but RE production offers a lower Energy Return On Energy Invested(EROEI). The transition is characterized by a decreasing trend of the aggregate EROEI and by major changes both in the allocation of output between consumption and investment and in the allocation of capital between energy and final good productions. As a result, the energy transition may (and will usually) be characterized by a non-monotonic evolution of aggregate income and private consumption: after a peak and before the NRE exhaustion, the economy experiences a contraction. We analyze what affects 1) its magnitude and 2) the possibility of an ulterior recovery of income. Incidentally, a complementarity appears between a rapid development of RE production and the availability of NRE: the end of the NRE era puts a drag on the development of the RE production.

Keywords: Energy transition; EROEI (search for similar items in EconPapers)
JEL-codes: Q32 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2015-02
New Economics Papers: this item is included in nep-ene and nep-mfd
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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2015.04

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