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Economic growth and the transition from non-renewable to renewable energy

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  • Greiner, Alfred
  • Gruene, Lars
  • Semmler, Willi

Abstract

The paper considers the transition of an economy from non-renewable to renewable energy. We set up a canonical growth model with damages in the household's welfare function and two energy sources – non-renewable and renewable energy. To produce renewable energy a capital stock must be built up. A socially optimal solution is considered that takes into account the negative externality from the non-renewable energy. We also study how the optimal solution can be mimicked in a market economy by policies using subsidies and tax rates. To solve the model numerically, we use Nonlinear Model Predictive Control. We study when a transition to renewable energy takes place and whether it occurs before the non-renewable resource is exhausted. In addition, we analyze the impact of the initial values of the non-renewable resource and of the capital stock on the time of paths of the variables.

Suggested Citation

  • Greiner, Alfred & Gruene, Lars & Semmler, Willi, 2014. "Economic growth and the transition from non-renewable to renewable energy," Environment and Development Economics, Cambridge University Press, vol. 19(4), pages 417-439, August.
    • Handle: RePEc:cup:endeec:v:19:y:2014:i:04:p:417-439_00
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    References listed on IDEAS

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    8. Christoph Heinzel & Ralph Winkler, 2011. "Distorted Time Preferences and Time-to-Build in the Transition to a Low-Carbon Energy Industry," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(2), pages 217-241, June.
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    Cited by:

    1. Frank L. Bartels & Bianca Cravenna, 2015. "Low Carbon Development: The Challenges of Green Energy Innovation," Globelics Working Paper Series 2015-03, Globelics - Global Network for Economics of Learning, Innovation, and Competence Building Systems, Aalborg University, Department of Business and Management.
    2. Semmler, Willi & Di Bartolomeo, Giovanni & Minooei Fard, Behnaz & Braga, Joao Paulo, 2022. "Limit pricing and entry game of renewable energy firms into the energy sector," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 179-190.
    3. Lamperti, F. & Dosi, G. & Napoletano, M. & Roventini, A. & Sapio, A., 2020. "Climate change and green transitions in an agent-based integrated assessment model," Technological Forecasting and Social Change, Elsevier, vol. 153(C).
    4. Elizaveta Gavrikova & Yegor Burda & Vladimir Gavrikov & Ruslan Sharafutdinov & Irina Volkova & Marina Rubleva & Daria Polosukhina, 2019. "Clean Energy Sources: Insights from Russia," Resources, MDPI, vol. 8(2), pages 1-25, May.
    5. Grüne, Lars & Semmler, Willi & Stieler, Marleen, 2015. "Using nonlinear model predictive control for dynamic decision problems in economics," Journal of Economic Dynamics and Control, Elsevier, vol. 60(C), pages 112-133.
    6. Erdyas Bimanatya, Traheka & Widodo, Tri, 2017. "Energy Conservation, Fossil Fuel Consumption, CO2 Emission and Economic Growth in Indonesia," MPRA Paper 79989, University Library of Munich, Germany.
    7. Nyambuu, Unurjargal & Semmler, Willi, 2020. "Climate change and the transition to a low carbon economy – Carbon targets and the carbon budget," Economic Modelling, Elsevier, vol. 84(C), pages 367-376.
    8. Di Bartolomeo, Giovanni & Saltari, Enrico & Semmler, Willi, 2019. "The effects of political short-termism on transitions induced by pollution regulations," EconStor Preprints 200143, ZBW - Leibniz Information Centre for Economics.
    9. Rehan, Mohammad & Raza, Muhammad Amir & Aman, M.M. & Abro, Abdul Ghani & Ismail, Iqbal Mohammad Ibrahim & Munir, Said & Summan, Ahmed & Shahzad, Khurram & Rashid, Muhammad Imtiaz & Ali, Nadeem, 2023. "Untapping the potential of bioenergy for achieving sustainable energy future in Pakistan," Energy, Elsevier, vol. 275(C).
    10. Francesco Lamperti & Giovanni Dosi & Mauro Napoletano & Andrea Roventini & Alessandro Sapio, 2018. "And then he wasn't a she : Climate change and green transitions in an agent-based integrated assessment model," Working Papers hal-03443464, HAL.
    11. Giovanni Di Bartolomeo & Behnaz Minooei Fard & Willi Semmler, 2021. "Greenhouse gases mitigation: Global externalities and short termism," Working Papers in Public Economics 196, University of Rome La Sapienza, Department of Economics and Law.
    12. Di Bartolomeo Giovanni & Saltari Enrico & Semmler Willi, 2017. "Inattention and pollution regulation policies," wp.comunite 00130, Department of Communication, University of Teramo.
    13. repec:hal:spmain:info:hdl:2441/5vt1fet9fq9o5pkgj2qh2vn1cm is not listed on IDEAS
    14. Fang, Guochang & Tian, Lixin & Fu, Min & Sun, Mei & He, Yu & Lu, Longxi, 2018. "How to promote the development of energy-saving and emission-reduction with changing economic growth rate—A case study of China," Energy, Elsevier, vol. 143(C), pages 732-745.
    15. Julia M. Puaschunder, 2022. "Inclusive Leadership and the Economics of Diversity," RAIS Conference Proceedings 2022-2023 0156, Research Association for Interdisciplinary Studies.
    16. Anthony Bonen & Willi Semmler & Stephan Klasen, 2014. "Economic Damages from Climate Change: A Review of Modeling Approaches," SCEPA working paper series. 2014-3, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    17. Anthony Bonen & Mr. Prakash Loungani & Willi Semmler & Sebastian Koch, 2016. "Investing to Mitigate and Adapt to Climate Change: A Framework Model," IMF Working Papers 2016/164, International Monetary Fund.

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    More about this item

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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