IDEAS home Printed from https://ideas.repec.org/p/bde/wpaper/1217.html
   My bibliography  Save this paper

Net energy analysis in a Ramsey-Hotelling growth model

Author

Listed:
  • Arturo Macías

    (Banco de España)

  • Mariano Matilla-García

    (Universiad Nacional de Educación a Distancia)

Abstract

This article presents a dynamic growth model with energy as an input in the production function. The available stock of energy resources is ordered by a quality parameter based on energy accounting: the “Energy Return on Energy Invested” (EROI). To our knowledge this is the first paper where EROI fits in a neoclassical growth model (with individual utility maximization and market equilibrium), setting the economic use of “net energy analysis” on firmer theoretical ground. All necessary concepts to link neoclassical economics and EROI are discussed before their use in the model, and a comparative static analysis of the steady states of a simplified version of the model is presented.

Suggested Citation

  • Arturo Macías & Mariano Matilla-García, 2012. "Net energy analysis in a Ramsey-Hotelling growth model," Working Papers 1217, Banco de España.
    • Handle: RePEc:bde:wpaper:1217
    as

    Download full text from publisher

    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/12/Fich/dt1217e.pdf
    File Function: First version, March 2012
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Reynolds, Douglas B., 1999. "The mineral economy: how prices and costs can falsely signal decreasing scarcity," Ecological Economics, Elsevier, vol. 31(1), pages 155-166, October.
    2. David I. Stern, 2012. "Ecological Economics," Crawford School Research Papers 1203, Crawford School of Public Policy, The Australian National University.
    3. Martin B. Zimmerman, 1977. "Modeling Depletion in a Mineral Industry: The Case of Coal," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 41-65, Spring.
    4. Nadiri, M Ishaq & Prucha, Ingmar R, 1996. "Estimation of the Depreciation Rate of Physical and R&D Capital in the U.S. Total Manufacturing Sector," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 43-56, January.
    5. van Zon, Adriaan & Yetkiner, I. Hakan, 2003. "An endogenous growth model with embodied energy-saving technical change," Resource and Energy Economics, Elsevier, vol. 25(1), pages 81-103, February.
    6. Ayres, Robert U. & Warr, Benjamin, 2005. "Accounting for growth: the role of physical work," Structural Change and Economic Dynamics, Elsevier, vol. 16(2), pages 181-209, June.
    7. Roberto F. Aguilera & Roderick G. Eggert & Gustavo Lagos C.C. & John E. Tilton, 2009. "Depletion and the Future Availability of Petroleum Resources," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 141-174.
    8. Jack P. Manno, 2011. "Looking for a Silver Lining: The Possible Positives of Declining Energy Return on Investment (EROI)," Sustainability, MDPI, vol. 3(11), pages 1-9, October.
    9. Belzil, Christian & Hansen, Jörgen, 1999. "Subjective Discount Rates, Intergenerational Transfers and the Return to Schooling," IZA Discussion Papers 60, Institute of Labor Economics (IZA).
    10. Kubiszewski, Ida & Cleveland, Cutler J. & Endres, Peter K., 2010. "Meta-analysis of net energy return for wind power systems," Renewable Energy, Elsevier, vol. 35(1), pages 218-225.
    11. Alan S. Manne, 1974. "Waiting for the Breeder," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 47-65.
    12. Kenny, R. & Law, C. & Pearce, J.M., 2010. "Towards real energy economics: Energy policy driven by life-cycle carbon emission," Energy Policy, Elsevier, vol. 38(4), pages 1969-1978, April.
    13. Charles Hall & Pradeep Tharakan & John Hallock & Cutler Cleveland & Michael Jefferson, 2003. "Hydrocarbons and the evolution of human culture," Nature, Nature, vol. 426(6964), pages 318-322, November.
    14. Baumol, William J & Wolff, Edward N, 1981. "Subsidies to New Energy," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 891-913, October.
    15. Kemfert, Claudia, 1998. "Estimated substitution elasticities of a nested CES production function approach for Germany," Energy Economics, Elsevier, vol. 20(3), pages 249-264, June.
    16. R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 29-45.
    17. Saaty, Thomas & Ma, Fred & Blair, Peter, 1977. "Operational gaming for energy policy analysis," Energy Policy, Elsevier, vol. 5(1), pages 63-75, March.
    18. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    19. Dale W. Jorgenson, 2009. "A New Architecture For The U.S. National Accounts," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(1), pages 1-42, March.
    20. Patrick J. Kehoe & Andrew Atkeson, 1999. "Models of Energy Use: Putty-Putty versus Putty-Clay," American Economic Review, American Economic Association, vol. 89(4), pages 1028-1043, September.
    21. Joseph Stiglitz, 1974. "Growth with Exhaustible Natural Resources: Efficient and Optimal Growth Paths," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 123-137.
    22. Bassi, Andrea M. & Powers, Robert & Schoenberg, William, 2010. "An integrated approach to energy prospects for North America and the rest of the world," Energy Economics, Elsevier, vol. 32(1), pages 30-42, January.
    23. Bentolila Samuel & Saint-Paul Gilles, 2003. "Explaining Movements in the Labor Share," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-33, October.
    24. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-974, December.
    25. Cutter J. Cleveland & Robert K. Kaufmann, 1991. "Forecasting Ultimate Oil Recovery and Its Rate of Production: Incorporating Economic Forces into the Models of M. King Hubbert," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 17-46.
    26. Chakravorty, Ujjayant & Roumasset, James & Tse, Kinping, 1997. "Endogenous Substitution among Energy Resources and Global Warming," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1201-1234, December.
    27. Martin Stürmer & Gregor Schwerhoff, 2012. "Non-Renewable but Inexhaustible – Resources in an Endogenous Growth Model," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2012_09, Max Planck Institute for Research on Collective Goods.
    28. Cleveland, Cutler J., 1992. "Energy quality and energy surplus in the extraction of fossil fuels in the U.S," Ecological Economics, Elsevier, vol. 6(2), pages 139-162, October.
    29. Charles A. S. Hall & Stephen Balogh & David J.R. Murphy, 2009. "What is the Minimum EROI that a Sustainable Society Must Have?," Energies, MDPI, vol. 2(1), pages 1-23, January.
    30. Stern, David I., 2010. "Energy quality," Ecological Economics, Elsevier, vol. 69(7), pages 1471-1478, May.
    31. Barro, Robert J, 1999. "Notes on Growth Accounting," Journal of Economic Growth, Springer, vol. 4(2), pages 119-137, June.
    32. Sweeney, James L, 1984. "The Response of Energy Demand to Higher Prices: What Have We Learned?," American Economic Review, American Economic Association, vol. 74(2), pages 31-37, May.
    33. Stern, David I., 2010. "The Role of Energy in Economic Growth," Working Papers 249380, Australian National University, Centre for Climate Economics & Policy.
    34. Phillips, W. G. B. & Edwards, D. P., 1976. "Metal prices as a function of ore grade," Resources Policy, Elsevier, vol. 2(3), pages 167-178, September.
    35. Philip F. Henshaw & Carey King & Jay Zarnikau, 2011. "System Energy Assessment (SEA), Defining a Standard Measure of EROI for Energy Businesses as Whole Systems," Sustainability, MDPI, vol. 3(10), pages 1-36, October.
    36. Ujjayant Chakravorty & Michel Moreaux & Mabel Tidball, 2008. "Ordering the Extraction of Polluting Nonrenewable Resources," American Economic Review, American Economic Association, vol. 98(3), pages 1128-1144, June.
    37. Shinkuma, Takayoshi & Nishiyama, Takashi, 2000. "The grade selection rule of the metal mines; an empirical study on copper mines," Resources Policy, Elsevier, vol. 26(1), pages 31-38, March.
    38. Charles A.S. Hall, 2011. "Introduction to Special Issue on New Studies in EROI (Energy Return on Investment)," Sustainability, MDPI, vol. 3(10), pages 1-5, October.
    39. Daniel Danxia Xie, 2011. "A Generalized Fact and Model of Long-Run Economic Growth: Kaldor Fact as a Special Case," Working Paper Series WP11-4, Peterson Institute for International Economics.
    40. David Cass, 1965. "Optimum Growth in an Aggregative Model of Capital Accumulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(3), pages 233-240.
    41. Kemfert, Claudia & Welsch, Heinz, 2000. "Energy-Capital-Labor Substitution and the Economic Effects of CO2 Abatement: Evidence for Germany," Journal of Policy Modeling, Elsevier, vol. 22(6), pages 641-660, November.
    42. Stephen P. Holland, 2008. "Modeling Peak Oil," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 61-80.
    43. Lance J. Bachmeier & James M. Griffin, 2006. "Testing for Market Integration: Crude Oil, Coal, and Natural Gas," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 55-72.
    44. Stern, David I., 1997. "Limits to substitution and irreversibility in production and consumption: A neoclassical interpretation of ecological economics," Ecological Economics, Elsevier, vol. 21(3), pages 197-215, June.
    45. Bullard, Clark W. & Penner, Peter S. & Pilati, David A., 1978. "Net energy analysis : Handbook for combining process and input-output analysis," Resources and Energy, Elsevier, vol. 1(3), pages 267-313, November.
    46. R. Stresing & D. Lindenberger & R. Kümmel, 2008. "Cointegration of output, capital, labor, and energy," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 66(2), pages 279-287, November.
    47. Koetse, Mark J. & de Groot, Henri L.F. & Florax, Raymond J.G.M., 2008. "Capital-energy substitution and shifts in factor demand: A meta-analysis," Energy Economics, Elsevier, vol. 30(5), pages 2236-2251, September.
    48. Li Hong & Pei Dong, Zhang & Chunyu, He & Wang Gang, 2007. "Evaluating the effects of embodied energy in international trade on ecological footprint in China," Ecological Economics, Elsevier, vol. 62(1), pages 136-148, April.
    49. Partha Dasgupta & Geoffrey Heal, 1974. "The Optimal Depletion of Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 3-28.
    50. Jean-Baptiste Lesourd & Yvon Gousty, 1981. "Bases économiques et thermodynamiques des techniques de comptabilité de l'énergie," Revue d'Économie Industrielle, Programme National Persée, vol. 15(1), pages 44-59.
    51. Anderson, R. K. & Moroney, J. R., 1993. "Morishima elasticities of substitution with nested production functions," Economics Letters, Elsevier, vol. 42(2-3), pages 159-166.
    52. David J. Murphy & Charles A.S. Hall & Michael Dale & Cutler Cleveland, 2011. "Order from Chaos: A Preliminary Protocol for Determining the EROI of Fuels," Sustainability, MDPI, vol. 3(10), pages 1-20, October.
    53. Battisti, Riccardo & Corrado, Annalisa, 2005. "Evaluation of technical improvements of photovoltaic systems through life cycle assessment methodology," Energy, Elsevier, vol. 30(7), pages 952-967.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, Yingchao & Feng, Lianyong & Wang, Jianliang & Höök, Mikael, 2017. "Emergy-based energy return on investment method for evaluating energy exploitation," Energy, Elsevier, vol. 128(C), pages 540-549.
    2. Rye, Craig D. & Jackson, Tim, 2018. "A review of EROEI-dynamics energy-transition models," Energy Policy, Elsevier, vol. 122(C), pages 260-272.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David I. Stern, 2010. "The Role of Energy in Economic Growth," CCEP Working Papers 0310, Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University.
    2. Richard Green and Nicholas Vasilakos, 2012. "Storing Wind for a Rainy Day: What Kind of Electricity Does Denmark Export?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    3. Renaud Coulomb & Oskar Lecuyer & Adrien Vogt-Schilb, 2019. "Optimal Transition from Coal to Gas and Renewable Power Under Capacity Constraints and Adjustment Costs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(2), pages 557-590, June.
    4. Beatrix Gaitan & Terry Roe, 2012. "International Trade, Exhaustible-Resource Abundance and Economic Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(1), pages 72-93, January.
    5. Hou, Zheng & Roseta-Palma, Catarina & Ramalho, Joaquim José dos Santos, 2021. "Does directed technological change favor energy? Firm-level evidence from Portugal," Energy Economics, Elsevier, vol. 98(C).
    6. Andre, Francisco J. & Cerda, Emilio, 2005. "On natural resource substitution," Resources Policy, Elsevier, vol. 30(4), pages 233-246, December.
    7. David I. Stern and Astrid Kander, 2012. "The Role of Energy in the Industrial Revolution and Modern Economic Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    8. Waisman, Henri & Rozenberg, Julie & Sassi, Olivier & Hourcade, Jean-Charles, 2012. "Peak Oil profiles through the lens of a general equilibrium assessment," Energy Policy, Elsevier, vol. 48(C), pages 744-753.
    9. Radoslaw Stefanski, 2014. "Structural Transformation and the Oil Price," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(3), pages 484-504, July.
    10. Berk, Istemi & Yetkiner, Hakan, 2014. "Energy prices and economic growth in the long run: Theory and evidence," Renewable and Sustainable Energy Reviews, Elsevier, vol. 36(C), pages 228-235.
    11. King, Carey W., 2014. "Matrix method for comparing system and individual energy return ratios when considering an energy transition," Energy, Elsevier, vol. 72(C), pages 254-265.
    12. Santos, João & Domingos, Tiago & Sousa, Tânia & St. Aubyn, Miguel, 2016. "Does a small cost share reflect a negligible role for energy in economic production? Testing for aggregate production functions including capital, labor, and useful exergy through a cointegration-base," MPRA Paper 70850, University Library of Munich, Germany.
    13. Toman, Michael & Pezzey, John C., 2002. "The Economics of Sustainability: A Review of Journal Articles," RFF Working Paper Series dp-02-03, Resources for the Future.
    14. Maciej Malaczewski, 2018. "Natural Resources As An Energy Source In A Simple Economic Growth Model," Bulletin of Economic Research, Wiley Blackwell, vol. 70(4), pages 362-380, October.
    15. Smith, James L., 2012. "On the portents of peak oil (and other indicators of resource scarcity)," Energy Policy, Elsevier, vol. 44(C), pages 68-78.
    16. Barreto, Raul A., 2018. "Fossil fuels, alternative energy and economic growth," Economic Modelling, Elsevier, vol. 75(C), pages 196-220.
    17. V.Martinet & L. Doyen, 2003. "Sustainable management of an exhaustible resource:a viable control model," THEMA Working Papers 2003-36, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    18. Martinet, Vincent & Rotillon, Gilles, 2007. "Invariance in growth theory and sustainable development," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2827-2846, August.
    19. Daniele Schilirò, 2019. "Sustainability, Innovation, and Efficiency: A Key Relationship," Palgrave Studies in Impact Finance, in: Magdalena Ziolo & Bruno S. Sergi (ed.), Financing Sustainable Development, chapter 0, pages 83-102, Palgrave Macmillan.
    20. Mircea Sˇveanu, 2014. "Energy and the Economics of Sustainability. The Entropy Paradox," Management of Sustainable Development, Sciendo, vol. 6(1), pages 1-5, August.

    More about this item

    Keywords

    EROI; net energy analysis; growth; Ramsey-Hotelling; energy depletion;
    All these keywords.

    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bde:wpaper:1217. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España (email available below). General contact details of provider: https://edirc.repec.org/data/bdegves.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.