On the Optimal Timing of Switching from non-Renewable to Renewable Resources: Dirty vs Clean Energy Sources and the Relative Efficiency of Generators

Elettra Agliardi and Luigi Sereno ()
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Luigi Sereno: Department of Economics, University of Bologna, Italy

Working Paper series from Rimini Centre for Economic Analysis

Abstract: We develop a model on the optimal timing of switching from non-renewable to renewable energy sources with endogenous extraction choices under emission taxes, subsidies on renewable resources and abatement costs. We assume that non-renewable resources are "dirty" inputs and create environmental degradation, while renewable resources are more environmentally friendly, although they may be more or less productive than the exhaustible resources. The value of the switching option from non-renewable to renewable resources is characterized. Numerical applications show that an increase in emission taxes, abatement costs or demand elasticity slows down the adoption of substitutable renewable resources, while an increase in the natural rate of resource regeneration, the stock of renewable resources or the relative productivity parameter speeds up the investment in the green technology.

Keywords: Non-renewable resources; Renewable resources; Environmentally friendly technologies; Abatement costs; Subsidies; Taxes; Optimal switching time; Real options (search for similar items in EconPapers)
JEL-codes: D81 H23 Q28 Q38 Q40 Q50 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-res
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Related works:
Working Paper: On the optimal timing of switching from non-renewable to renewable resources: dirty vs clean energy sources and the relative efficiency of generators (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:11_13

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