Carbon Lock-In: The Role of Expectations
Copyright policy )Carbon Lock-In: The Role of Expectations
AbstractWe argue that expectations about future energy use affect the transition from fossil to renewables because of an interaction between innovation and resource scarcity. This article presents a model of directed technical change to study this interaction. We find that fossil‐saving technical change erodes the incentives to implement renewables. Conversely, the anticipation of a transition to renewables diminishes the incentives to invest in fossil technology. As a result, two equilibria may arise, one with a transition to renewables and with low fossil efficiency and one without renewables and with high fossil efficiency. Expectations determine which equilibrium arises.
- University of Calgary Canada
- Tinbergen Institute Netherlands
- STICHTING KATHOLIEKE UNIVERSITEIT BRABANT UNIVERSITEIT VAN TILBURG Netherlands
- Vrije Universiteit Amsterdam Netherlands
- Tilbury University Netherlands
Q42, Environmental economics (natural resource models, harvesting, pollution, etc.), technological change, alternative energy sources, fossil energy, future energy use, multiple equilibria, Directed technical change, energy transition, multiple equilibria, Directed technical change, Q32, ddc:330, O30, resource scarcity, Q55, renewable energy, innovation, non-renewable resources, endogenous growth, energy transition, Economic growth models, jel: jel:Q42, jel: jel:O30, jel: jel:Q55, jel: jel:Q32
Q42, Environmental economics (natural resource models, harvesting, pollution, etc.), technological change, alternative energy sources, fossil energy, future energy use, multiple equilibria, Directed technical change, energy transition, multiple equilibria, Directed technical change, Q32, ddc:330, O30, resource scarcity, Q55, renewable energy, innovation, non-renewable resources, endogenous growth, energy transition, Economic growth models, jel: jel:Q42, jel: jel:O30, jel: jel:Q55, jel: jel:Q32
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