Carbon lock-in: The role of expectations
van der Meijden,G.C. Smulders,Sjak
van der Meijden,G.C.
Smulders,Sjak
Abstract
We argue that expectations about future energy use affect the transition from fossil to renewables, because of an interaction between innovation and resource scarcity. The paper 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 in equilibrium.
Description
Date
2017-11-28
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
O30 - General, Q32 - Exhaustible Resources and Economic Development, Q42 - Alternative Energy Sources, Q55 - Technological Innovation
Citation
van der Meijden, G C & Smulders, S 2017, 'Carbon lock-in : The role of expectations', International Economic Review, vol. 58, no. 4, pp. 1371-1415. https://doi.org/10.1111/iere.12255