Advanced Search
MyIDEAS: Login

Producing energy in a stochastic environment: Switching from non-renewable to renewable resources

Contents:

Author Info

  • Mosiño, Alejandro

Abstract

In this paper, we study the determinants of switching from non-renewable natural resource inputs to renewable resource inputs in energy production. We assume that the stocks of both natural resources are stochastic, and that the adoption of renewable resources is costly and irreversible. Our formulation gives raise to an optimal stopping/switching problem that cannot be solved analytically, then we turn to numerical simulations. Our results suggest that the optimal switching time depends not only on the uncertainty parameters, but also on energy demand, costs, and the relative productivity of the resources.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0928765512000188
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): 4 ()
Pages: 413-430

as in new window
Handle: RePEc:eee:resene:v:34:y:2012:i:4:p:413-430

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505569

Related research

Keywords: Optimal switching time; Renewable resources; Non-renewable resources; Uncertainty; Irreversibility;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Pindyck, Robert S., 1986. "Irreversible investment, capacity choice, and the value of the firm," Working papers 1802-86., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Grimaud, André & Rougé, Luc, 2007. "Environment, Directed Technical Change and Economic Policy," IDEI Working Papers 384, Institut d'Économie Industrielle (IDEI), Toulouse.
  3. Tahvonen, Olli & Salo, Seppo, 2001. "Economic growth and transitions between renewable and nonrenewable energy resources," European Economic Review, Elsevier, vol. 45(8), pages 1379-1398, August.
  4. Alejandro Mosiño, 2012. "Using Chebyshev Polynomials to Approximate Partial Differential Equations: A Reply," Computational Economics, Society for Computational Economics, vol. 39(1), pages 13-27, January.
  5. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2009. "The Environment and Directed Technical Change," NBER Working Papers 15451, National Bureau of Economic Research, Inc.
  6. Pindyck, Robert S., 2000. "Irreversibilities and the timing of environmental policy," Resource and Energy Economics, Elsevier, vol. 22(3), pages 233-259, July.
  7. Kalyan Raman & Rabikar Chatterjee, 1995. "Optimal Monopolist Pricing Under Demand Uncertainty in Dynamic Markets," Management Science, INFORMS, vol. 41(1), pages 144-162, January.
  8. Dorothée Charlier & Alejandro Mosino & Aude Pommeret, 2011. "Energy-saving Technology Adoption under Uncertainty in the Residential Sector," Post-Print hal-00937500, HAL.
  9. Chakravorty, Ujjayant & Roumasset, James & Tse, Kinping, 1997. "Endogenous Substitution among Energy Resources and Global Warming," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1201-34, December.
  10. Merton, Robert C, 1975. "An Asymptotic Theory of Growth under Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 42(3), pages 375-93, July.
  11. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
  12. Pindyck, Robert S, 1980. "Uncertainty and Exhaustible Resource Markets," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1203-25, December.
  13. Wirl, Franz, 2006. "Pollution thresholds under uncertainty," Environment and Development Economics, Cambridge University Press, vol. 11(04), pages 493-506, August.
  14. Mario J. Miranda & Paul L. Fackler, 2004. "Applied Computational Economics and Finance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633094, December.
  15. Francisco J. André & Emilio Cerdá, 2004. "On natural resource substitution," Economic Working Papers at Centro de Estudios Andaluces E2004/48, Centro de Estudios Andaluces.
  16. Maddala, G S, et al, 1997. "Estimation of Short-Run and Long-Run Elasticities of Energy Demand from Panel Data Using Shrinkage Estimators," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 90-100, January.
  17. Krautkraemer, Jeffrey A., 1986. "Optimal depletion with resource amenities and a backstop technology," Resources and Energy, Elsevier, vol. 8(2), pages 133-149, June.
  18. Aude Pommeret & Fabien Prieur, 2009. "Double Irreversibility and Environmental Policy Design," Working Papers 2009.10, Fondazione Eni Enrico Mattei.
  19. Smith, William & Son, Young Seob, 2005. "Can the desire to conserve our natural resources be self-defeating?," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 52-67, January.
  20. Mason, Charles F., 2001. "Nonrenewable Resources with Switching Costs," Journal of Environmental Economics and Management, Elsevier, vol. 42(1), pages 65-81, July.
  21. Harris, Jonathan M. & Kennedy, Scott, 1999. "Carrying capacity in agriculture: global and regional issues," Ecological Economics, Elsevier, vol. 29(3), pages 443-461, June.
  22. Dangl, Thomas & Wirl, Franz, 2004. "Investment under uncertainty: calculating the value function when the Bellman equation cannot be solved analytically," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1437-1460, April.
  23. Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, vol. 58(2), pages 135-57, April.
  24. Pindyck, Robert S., 2002. "Optimal timing problems in environmental economics," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1677-1697, August.
  25. Pindyck, Robert S, 1984. "Uncertainty in the Theory of Renewable Resource Markets," Review of Economic Studies, Wiley Blackwell, vol. 51(2), pages 289-303, April.
  26. Balikcioglu, Metin & Fackler, Paul L. & Pindyck, Robert S., 2011. "Solving optimal timing problems in environmental economics," Resource and Energy Economics, Elsevier, vol. 33(3), pages 761-768, September.
  27. Dixit, Avinash, 1991. "A simplified treatment of the theory of optimal regulation of Brownian motion," Journal of Economic Dynamics and Control, Elsevier, vol. 15(4), pages 657-673, October.
  28. Pommeret, Aude & Schubert, Katheline, 2009. "Abatement Technology Adoption Under Uncertainty," Macroeconomic Dynamics, Cambridge University Press, vol. 13(04), pages 493-522, September.
  29. Epaulard, Anne & Pommeret, Aude, 2003. "Optimally eating a stochastic cake: a recursive utility approach," Resource and Energy Economics, Elsevier, vol. 25(2), pages 129-139, May.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:34:y:2012:i:4:p:413-430. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.