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Imperfect resource substitution and optimal transition to clean technologies

  • VARDAR, N. Baris

    ()

    (Paris School of Economics)

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    Non-renewable and renewable resources are imperfect substitutes due to technical and geographical constraints. What is the role of imperfect substitution on the optimal transition path to the clean technologies? We address this question by characterizing the optimal growth path and resource use of an economy. We show that the economy initially starts with using the non-renewable and renewable resources simultaneously and gradually increases the share of renewable. The outcome can be either (i) the economy switches to a backstop at a certain date or (ii) the initial regime lasts forever. The results show that the economy converges to a steady state even if the backstop is too costly and a green, zero-carbon economy is the optimal final state in any case. We also present some simulation results to illustrate the shapes of the optimal paths. This analysis allows us to discuss the policy implications and question the existence of the Green Paradox.

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    File URL: http://uclouvain.be/cps/ucl/doc/core/documents/coredp2013_72web.pdf
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    Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2013072.

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    Date of creation: 31 Dec 2013
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    Handle: RePEc:cor:louvco:2013072
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    1. FORSTER, Manuel & MAULEON, Ana & VANNETELBOSCH, Vincent, 2013. "Trust and manipulation in social networks," CORE Discussion Papers 2013050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    4. Nigar Hashimzade & Jean Hindriks & Gareth D. Myles, 2006. "Solutions Manual to Accompany Intermediate Public Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582694, June.
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    14. Snorre Kverndokk, 1994. "Depletion of Fossil Fuels and the impact of Global Warming," Discussion Papers 107, Statistics Norway, Research Department.
    15. Hung, N. M. & Quyen, N. V., 1993. "On R&D timing under uncertainty : The case of exhaustible resource substitution," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 971-991.
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