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Endogenous elasticity of substitution as a catalyst for Green transition: Evidence from Bangladesh, Nigeria and China

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  • Fu, Tong
  • Zhou, Zongyu
  • Yin, Guanzhong

Abstract

How to optimize environmental policies supporting industrial Green transition and decarbonization strategies at the lowest economic cost is a major challenge for emerging economies. As a key parameter in evaluating the progress of economic Green transition, the elasticity of substitution between dirty and clean energy significantly affects the formulation of optimal environmental policies. In this study, we select Bangladesh, Nigeria, and China as experimental subjects and relax the assumption of fixed substitution elasticity, we construct a dynamic stochastic general equilibrium model incorporating endogenous substitution elasticity to capture the dynamic response trends of different environmental policies. The findings reveal a virtuous cycle driven by endogenous substitution elasticity, which amplifies environmental policies and creates a synergistic effect with green technological progress, accelerating the green transition.

Suggested Citation

  • Fu, Tong & Zhou, Zongyu & Yin, Guanzhong, 2026. "Endogenous elasticity of substitution as a catalyst for Green transition: Evidence from Bangladesh, Nigeria and China," Energy Economics, Elsevier, vol. 160(C).
    • Handle: RePEc:eee:eneeco:v:160:y:2026:i:c:s0140988326003300
    DOI: 10.1016/j.eneco.2026.109451
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    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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