Creative destruction and energy transition

Jean-Pierre Amigues
Additional contact information
Jean-Pierre Amigues: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

Working Papers from HAL

Abstract: The energy transition is often described as a 'wall of investment' issue. But not only renewable energy expansion must cope with the carbon free energy needs result-ing from the Paris agreement but most of the present day fossil energy production capital will have to be abandoned by the middle of the century. We consider a partial equilibrium model where energy is produced from a CO2 polluting source and a carbon free source. Crude energy transformation into energy services requires specific capital infrastructures, accumulated through a costly investment process submitted to ad-justment costs. Fossil fuels burning generates CO2 emissions and the total cumulated emissions is caped by a global atmospheric CO2 concentration stabilisation objective. We describe the socially optimal policy in this context. Prior to the phase when the society is actually constrained by the climate cap, we show that the pattern of evo-lution of the production capacities of the fossil fuel industry exhibits a three regimes structure: fist an ascending phase, followed by a stabilisation phase when the industry stops investing and its production capacity peaks before falling when approaching the time at which the climate constraint becomes binding. During the two first phases, the energy transition occurs in a context of increasing energy supply while it happens in a context of increasing energy scarcity during the last phase, capacity accumula-tion in the renewable energy industry being lower than the scraping of capacities in the fossil fuels industry. The non-monotonicity of the energy price path induces the possibility of waves of investment in the clean renewable energy sector. If fossil energy gets a larger share in the fuel mix at the beginning of the climate regulation, fossil energy production will peak at a larger level. We show that the regulator must adapt to this situation not by preventing a larger peak but by making it happen earlier, thus building initially a form of carbon 'saving' that will be progressively consumed afterwards before the climate constrained episode.

Keywords: Adjustment costs.; Capacity constraints; Energy transition; Climate change (search for similar items in EconPapers)
Date: 2026-06-23
Note: View the original document on HAL open archive server: https://hal.science/hal-05666216v1
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hal.science/hal-05666216v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-05666216

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().