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Fossil fuels, alternative energy and economic growth


  • Barreto, Raul A.


We present a theoretical framework that incorporates energy within an endogenous growth model. The model explicitly allows for the interaction and substitution between fossil fuels, defined as a non-renewable resource derived from some fixed initial stock, and alternative energy, defined as renewable resource whose production requires capital input. The dynamics of the model depict a unique balance growth to a steady state. The saddle path of consumption temporarily peaks, when fossil fuels are plentiful and cheap, followed by a fall, as fossil fuel become more scarce and alternative energy production has yet to take over, until finally the steady state is reached where alternative energy production fuels the entire economy.

Suggested Citation

  • Barreto, Raul A., 2018. "Fossil fuels, alternative energy and economic growth," Economic Modelling, Elsevier, vol. 75(C), pages 196-220.
  • Handle: RePEc:eee:ecmode:v:75:y:2018:i:c:p:196-220
    DOI: 10.1016/j.econmod.2018.06.019

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    References listed on IDEAS

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    1. T. M. Yunus Khan, 2020. "A Review of Performance-Enhancing Innovative Modifications in Biodiesel Engines," Energies, MDPI, Open Access Journal, vol. 13(17), pages 1-1, August.
    2. 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.
    3. Sergey O. Chikunov & Olga N. Gutsunuk & Marina I. Ivleva & Isabella D. Elyakova & Irina V. Nikolaeva & Maksim S. Maramygin, 2018. "Improving the economic performance of Russia’s energy system based on the development of alternative energy sources," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 382-391.
    4. Ali Jallal, Mohammed & Chabaa, Samira & Zeroual, Abdelouhab, 2020. "A novel deep neural network based on randomly occurring distributed delayed PSO algorithm for monitoring the energy produced by four dual-axis solar trackers," Renewable Energy, Elsevier, vol. 149(C), pages 1182-1196.
    5. Andreu Cecilia & Javier Carroquino & Vicente Roda & Ramon Costa-Castelló & Félix Barreras, 2020. "Optimal Energy Management in a Standalone Microgrid, with Photovoltaic Generation, Short-Term Storage, and Hydrogen Production," Energies, MDPI, Open Access Journal, vol. 13(6), pages 1-1, March.
    6. Rasoulinezhad, Ehsan & Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Sarker, Tapan, 2019. "Russian Federation–East Asia Liquefied Natural Gas Trade Patterns and Regional Energy Security," ADBI Working Papers 965, Asian Development Bank Institute.
    7. Hoang, Thi Hong Van & Shahzad, Syed Jawad Hussain & Czudaj, Robert L., 2020. "Renewable energy consumption and industrial production: A disaggregated time-frequency analysis for the U.S," Energy Economics, Elsevier, vol. 85(C).
    8. Ignacio, Luís Henrique da Silva & Santos, Pedro Eduardo de Almeida & Duarte, Carlos Antonio Ribeiro, 2019. "An experimental assessment of Eucalyptus urosemente energy potential for biomass production in Brazil," Renewable and Sustainable Energy Reviews, Elsevier, vol. 103(C), pages 361-369.
    9. Carlos Roldán-Porta & Carlos Roldán-Blay & Guillermo Escrivá-Escrivá & Eduardo Quiles, 2019. "Improving the Sustainability of Self-Consumption with Cooperative DC Microgrids," Sustainability, MDPI, Open Access Journal, vol. 11(19), pages 1-1, October.

    More about this item


    Endogenous growth; Non-renewable resources; Renewable resources; Energy; Oil; Fossil fuels; Alternative energy;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices


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