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Energy Saving Innovations, Non-Exhaustible Sources of Energy and Long-Run: What Would Happen if we Run Out of Oil?

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  • Hernando Zuleta

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Abstract

We formulate and solve a model of factor saving technological improvementconsidering three factors of production: labor, capital and energy.The productive activities have three main characteristics: first, in order to usecapital goods firms need energy; second, there are two sources of energy: nonexhaustibleand exhaustible; third, capital goods can be of different qualitiesand the quality of these goods can be changed along two dimensions-reducingthe need of energy or changing the source of energy used in the productionprocess. The economy goes through three stages of development after industrialization.In the first one, firms make use of exhaustible energy and theefficiency in the use of energy is constant. In the second stage, as the price ofenergy grows the efficiency in its use is increased. In the third stage, the price ofexhaustible sources is so high that firms have incentives to use non-exhaustiblesources of energy. During this stage the price of energy is constant. In this setup, the end of the oil age has level effects on consumption and output but itdoes not cause the collapse of the economic system.**Se formula y resuelve un modelo de cambio tecnológico ahorradorde factores de producción que considera tres factores: capital, trabajo yenergía. El modelo cuenta con características específicas con respecto a la interacción entre la energía (la cual, de acuerdo a su fuente puede ser renovabley no renovable) y el capital. Una vez esta economía se ha definido, se suponeque evoluciona en tres etapas luego de su industrialización, durante las cualesel carácter renovable o no renovable de la energía influye su precio relativo,eficiencia y afecta también el nivel agregado de consumo y producción de laeconomía, sin que esta evolución lleve al colapso del sistema económico.

Suggested Citation

  • Hernando Zuleta, 2008. "Energy Saving Innovations, Non-Exhaustible Sources of Energy and Long-Run: What Would Happen if we Run Out of Oil?," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO, November.
  • Handle: RePEc:col:000151:006168
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    References listed on IDEAS

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    More about this item

    Keywords

    non-exhaustible energy; energy saving innovations; economicgrowth.**energía renovable; innovaciones ahorradoras de energía; crecimientoeconómico.;

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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