Decarbonization with Endogenous Energy Innovations

Abstract: Achieving the internationally agreed climate targets will require major efforts in the use of renewable energies and effective public policies. The paper presents an endogenous growth model with polluting and clean energies as inputs. Knowledge is accumulated through innovations on the aggregate level and in the provision of dirty and clean energy. Clean energy gains market share once it reaches a critical threshold that depends on sectoral and cross-sectoral knowledge diffusion and policy. Carbon taxes and subsidies for clean energy infrastructure have a symmetric effect on the energy transition. The speed of transition determines the increase or decrease in the value of infrastructure in the two energy sectors, which may influence political decisions on the stringency of climate policy.

Further information on the Economics Research Seminar can be found here. 

Author: Responsible: Thomas Steger