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A Dynamic Optimization on Energy Efficiency in Developing Countries

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  • Wang, Dong

Abstract

This paper introduces a way for measuring the energy efficiency in economics besides the methods in physics. The linkage among energy efficiency, energy consumption and other macroeconomic variables is demonstrated primarily. Based on the methodology of dynamic optimization, a maximum problem of energy efficiency over time is subjected to the extended Solow growth model and instantaneous investment rate. In this model, energy consumption is set as control variable and investment is regarded as state variable. The analytic solutions can be derived and the diagrammatic analysis provides saddle-point equilibrium. With assigning values to parameters, a numerical simulation is presented; meanwhile the optimal paths of investment and energy consumption can be drawn. The discussion on modelling and implications is organized in the end. The dynamic optimization encourages governments in developing countries to pursue higher energy efficiency as it can reduce energy use without influencing the achievement of steady state in terms of Solow model.

Suggested Citation

  • Wang, Dong, 2012. "A Dynamic Optimization on Energy Efficiency in Developing Countries," MPRA Paper 43749, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:43749
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    References listed on IDEAS

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    Cited by:

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    2. Erdyas Bimanatya, Traheka & Widodo, Tri, 2017. "Energy Conservation, Fossil Fuel Consumption, CO2 Emission and Economic Growth in Indonesia," MPRA Paper 79989, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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