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On the transition from nonrenewable energy to renewable energy

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  • Yacoub Bahini
  • Cuong Le Van

Abstract

In this paper we use the CMM model (Chakravorty et al.,2006) in discrete time and obtain more results concerning the exhaustion time of Non-Renewable Resource (NRE), the dynamic regimes of energy prices, of the stocks of pollution. We show that NRE is exhausted in finite time and is directly influenced by the initial stock of NRE and the costs of NRE and RE. Higher is the initial stock of NRE, far is the time of exhaustion of NRE. Higher is the cost of NRE (resp. the difference of unit costs between RE and NRE), far is the time of exhaustion of NRE. Furthermore, we show that the abatement intervenes, when necessary, not more than two periods. We also show that, when the unit extraction cost of RE is not very high, the stocks of emissions will never be binding if and only if, the initial stock of NRE is less than a critical value.

Suggested Citation

  • Yacoub Bahini & Cuong Le Van, 2015. "On the transition from nonrenewable energy to renewable energy," Working Papers 2015-629, Department of Research, Ipag Business School.
    • Handle: RePEc:ipg:wpaper:2015-629
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    References listed on IDEAS

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    1. Geoffrey Heal, 2010. "Reflections--The Economics of Renewable Energy in the United States," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(1), pages 139-154, Winter.
    2. Chakravorty, Ujjayant & Magne, Bertrand & Moreaux, Michel, 2006. "A Hotelling model with a ceiling on the stock of pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2875-2904, December.
    3. Chakravorty, Ujjayant & Leach, Andrew & Moreaux, Michel, 2012. "Cycles in nonrenewable resource prices with pollution and learning-by-doing," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1448-1461.
    4. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    5. Robert M. Solow, 1974. "The Economics of Resources or the Resources of Economics," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 12, pages 257-276, Palgrave Macmillan.
    6. Amigues, Jean-Pierre & Kama, Alain Ayong Le & Moreaux, Michel, 2015. "Equilibrium transitions from non-renewable energy to renewable energy under capacity constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 55(C), pages 89-112.
    7. Schumacher, Ingmar, 2011. "When Should We Stop Extracting Nonrenewable Resources?," Macroeconomic Dynamics, Cambridge University Press, vol. 15(4), pages 495-512, September.
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    Keywords

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    JEL classification:

    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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