Hostname: page-component-586b7cd67f-r5fsc Total loading time: 0 Render date: 2024-11-20T07:08:26.606Z Has data issue: false hasContentIssue false
  • English
  • Français

Economic growth and the transition from non-renewable to renewable energy

Published online by Cambridge University Press:  22 November 2013

Alfred Greiner ,
Lars Gruene  and
Willi Semmler
Alfred Greiner
Affiliation:
Department of Business Administration and Economics, Bielefeld University, P.O. Box 100131, Bielefeld 33613, Germany. E-mail: agreiner@wiwi.uni-bielefeld.de
Lars Gruene
Affiliation:
Department of Mathematics, University of Bayreuth, Germany. E-mail: lars.gruene@uni-bayreuth.de
Willi Semmler
Affiliation:
Department of Economics, New School for Social Research and Department of Business Administration and Economics, Bielefeld University, Germany. E-mail: semmlerw@newschool.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

The paper considers the transition of an economy from non-renewable to renewable energy. We set up a canonical growth model with damages in the household's welfare function and two energy sources – non-renewable and renewable energy. To produce renewable energy a capital stock must be built up. A socially optimal solution is considered that takes into account the negative externality from the non-renewable energy. We also study how the optimal solution can be mimicked in a market economy by policies using subsidies and tax rates. To solve the model numerically, we use Nonlinear Model Predictive Control. We study when a transition to renewable energy takes place and whether it occurs before the non-renewable resource is exhausted. In addition, we analyze the impact of the initial values of the non-renewable resource and of the capital stock on the time of paths of the variables.

Type
Research Article
Information
Environment and Development Economics , Volume 19 , Issue 4 , August 2014 , pp. 417 - 439
Copyright
Copyright © Cambridge University Press 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Angeli, D., Amrit, R., and Rawlings, J.R. (2012), ‘On average performance and stability of economic model predictive control’, IEEE Transactions on Automatic Control 57(7): 1615–1626. doi: 10.1109/TAC.2011.2179349.CrossRefGoogle Scholar
Arrow, K.J. and Kurz, M. (1970), Public Investment, the Rate of Return, and Optimal Fiscal Policy, Baltimore, MD: John Hopkins Press.Google Scholar
Brechet, T., Carmacho, C., and Veliov, V.M. (2011), ‘Model predictive control, the economy, and the issue of global warming’, Annals of Operations Research, doi: 10.1007/s10479-011-0881-8.Google Scholar
Brechet, T., Carmacho, C., and Veliov, V.M. (2012), ‘Adaptive model-predictive climate policies in a multi-country setting’, Research Report No. 2012-02, University of Technology, Vienna.Google Scholar
Byrne, M.M. (1997), ‘Is growth a dirty word? Pollution, abatement and endogenous growth’, Journal of Development Economics 54: 261–284.CrossRefGoogle Scholar
Edenhofer, O., Lessmann, K., Kemfert, C., Grubb, M., and Kohler, J. (2006), ‘Induced technological change: exploring its implications for the economics of atmospheric stabilization. Synthesis report from the innovation modeling comparison project’, Energy Journal 27: 57–108.CrossRefGoogle Scholar
Greiner, A. (2011), ‘Environmental pollution, the public sector and economic growth: a comparison of different scenarios’, Optimal Control Applications & Methods 32: 527–544.CrossRefGoogle Scholar
Greiner, A., Gruene, L., and Semmler, W. (2010), ‘Growth and climate change: threshold and multiple equilibria’, in Crespo Cuaresma, J., Palokangas, T. and Tarasyev, A. (eds), Dynamic Systems, Economic Growth, and the Environment, Berlin: Springer, pp. 63–78.CrossRefGoogle Scholar
Greiner, A., Gruene, L., and Semmler, W. (2012a), ‘Economic growth and the transition from non-renewable to renewable energy’, [Available at] SSRN: http://ssrn.com/abstract=2098707.CrossRefGoogle Scholar
Greiner, A., Semmler, W., and Mette, T. (2012), ‘An economic model of oil exploration and extraction’, Computational Economics 40: 387–399.CrossRefGoogle Scholar
Gruene, L. (2013), ‘Economic receding horizon control without terminal constraints’, Automatica 49: 725–734.CrossRefGoogle Scholar
Gruene, L. and Pannek, J. (2012), Nonlinear Model Predictive Control-Theory and Algorithms, London: Springer Verlag.Google Scholar
Gruene, L. and Semmler, W. (2004), ‘Using dynamic programming with adaptive grid scheme for optimal control problems in economics’, Journal of Economic Dynamics and Control 28: 2427–2456.CrossRefGoogle Scholar
Heinzel, C. and Winkler, R. (2011), ‘Distorted time preferences and time-to-build in the transition to a low-carbon energy industry’, Environmental and Resource Economics 49: 217–241.CrossRefGoogle Scholar
Hoel, M. and Kverndokk, S. (1996), ‘Depletion of fossil fuels and the impacts of global warming’, Resource and Energy Economics 18: 115–136.CrossRefGoogle Scholar
Jacobson, M.Z. and Delucchi, M.A. (2011a), ‘Providing all global energy with wind, water, and solar power, Part I: Technologies, energy resources, quantities and areas of infrastructure, and materials’, Energy Policy 39: 1154–1169.CrossRefGoogle Scholar
Jacobson, M.Z. and Delucchi, M.A. (2011b), ‘Providing all global energy with wind, water, and solar power, Part II: Reliability, system and transmission costs, and policies’, Energy Policy 39: 1170–1190.CrossRefGoogle Scholar
Krautkraemer, J.A. (1985), ‘Optimal growth, resource amenities and the preservation of natural environments’, Review of Economic Studies 52: 153–170.CrossRefGoogle Scholar
Krautkraemer, J.A. (1998), ‘Nonrenewable resource scarcity’, Journal of Economic Literature 36: 2065–2107.Google Scholar
Mittnik, S., Kato, M., Samaan, D., and Semmler, W. (2013), ‘Climate policies and structural change – employment and output effects of sustainable growth’, in Semmler, W. and Bernard, L. (eds), The Macroeconomics of Climate Change, New York: Oxford University Press (forthcoming).Google Scholar
Nordhaus, W.D. (2008), A Question of Balance. Weighing the Options on Global Warming Policies, New Haven, CT: Yale University Press.CrossRefGoogle Scholar
Smulders, S. and Gradus, R. (1996), ‘Pollution abatement and long-term growth’, European Journal of Political Economy 12: 505–532.CrossRefGoogle Scholar
van der Ploeg, F. and Withagen, C. (2011), ‘Growth, renewables and the optimal carbon tax’, OxCarre Research Paper 55, University of Oxford, Oxford.CrossRefGoogle Scholar
van der Ploeg, F. and Withagen, C. (2012), ‘Too much coal, too few oil’, Journal of Public Economics 96: 62–77.CrossRefGoogle Scholar