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Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation

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  • Casey, Gregory

Abstract

I build a quantitative model of economic growth that can be used to evaluate the impact of environmental policy interventions on final-use energy consumption, an important driver of carbon emissions. In the model, energy demand is driven by endogenous and directed technical change (DTC). Energy supply is subject to increasing extraction costs. Unlike existing DTC models, I consider the case where multiple technological characteristics are embodied in each capital good, a formulation conducive to studying final-use energy. The model is consistent with aggregate evidence on energy use, efficiency, and prices in the United States. I examine the impact of new energy taxes and compare the results to the standard Cobb-Douglas approach used in the environmental macroeconomics literature, which is not consistent with data. When examining a realistic and identical path of energy taxes in both models, the DTC model predicts 22% greater cumulative energy use over the next century. I also use the model to study the macroeconomic consequences of R & D subsidies for new energy efficient technologies. I find large rebound effects that undo short-term reductions in energy use.
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  • Casey, Gregory, "undated". "Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259959, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea17:259959
    DOI: 10.22004/ag.econ.259959
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    File URL: http://ageconsearch.umn.edu/record/259959/files/Abstracts_17_07_11_16_41_38_67__172_16_20_110_0.pdf
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    Cited by:

    1. Gregory Casey, 2018. "Technology-Driven Unemployment," 2018 Meeting Papers 302, Society for Economic Dynamics.

    More about this item

    Keywords

    Land Economics/Use; Resource/Energy Economics and Policy; Production Economics;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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