The Joint Dynamics of the Energy Mix, Land Uses and Energy Efficiency Rates During the Transition Toward the Green Economy

The global economy produces energy from two sources: a polluting nonrenewable resource and a renewable resource. Transforming crude energy into ready-to-use energy services requires costly processes and more efficient energy transformation rates are more costly to achieve. Renewable energy is in competition with food production for land acreage but the food productivity rate of land can also be improved at some cost. The exploitation of non-renewable energy releases polluting emissions in the atmosphere. To avoid catastrophic climate damages, the pollution stock is mandated to stay below a given cap. In the interesting case where the economy would be constrained by the carbon cap at least temporarily, we show the following. When the economy is not constrained by the cap, the efficiency rates of energy transformation increase steadily until the transition toward the ultimate green economy; when renewable energy is exploited, its land acreage rises at the expense of food production; food productivity increases together with the land rent but food production drops; the prices of useful energy and food increase and renewables substitute for non-renewable energy. During the constrained phase, the economy follows a constant path of prices, quantities, efficiency rates, food productivity and land rent, a phenomenon we call the generalized ceiling paradox.