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Can the Energy Transition Be Smooth?

Author

Listed:
  • Jean-François Fagnart

    (CEREC, Université Saint-Louis Bruxelles and IRES, UCLouvain.)

  • Marc Germain

    (EQUIPPE, Université de Lille 3 and IRES, UCLouvain)

Abstract

We analyse the transition of a decentralized economy whose energy supply switches progressively from non-renewable (NRE) to renewable energy (RE) sources. The two energies are perfect substitutes but RE production offers a lower Energy Return On Energy Invested(EROEI). The transition is characterized by a decreasing trend of the aggregate EROEI and by major changes both in the allocation of output between consumption and investment and in the allocation of capital between energy and final good productions. As a result, the energy transition may (and will usually) be characterized by a non-monotonic evolution of aggregate income and private consumption: after a peak and before the NRE exhaustion, the economy experiences a contraction. We analyze what affects 1) its magnitude and 2) the possibility of an ulterior recovery of income. Incidentally, a complementarity appears between a rapid development of RE production and the availability of NRE: the end of the NRE era puts a drag on the development of the RE production.

Suggested Citation

  • Jean-François Fagnart & Marc Germain, 2015. "Can the Energy Transition Be Smooth?," Working Papers 2015.04, FAERE - French Association of Environmental and Resource Economists.
    • Handle: RePEc:fae:wpaper:2015.04
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Energy transition; EROEI;

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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