Lemoine, Derek   <br/><br/>
Innovation-led transitions in energy supply 

 - American Economic Journal: Macroeconomics   
 - 16(1), Jan, 2024: p.29-65 
<br/><br/> Generalizing models of directed technical change, I show that complementarities between innovations and factors of production (here, energy resources) can drive transitions away from a dominant sector. In a calibrated numerical implementation, the economy gradually transitions energy supply from coal to gas and then to renewable energy, even in the absence of policy. The welfare-maximizing tax on carbon emissions is J-shaped, immediately redirects most research to renewables, and rapidly transitions energy supply directly to renewables. The emission tax is twice as valuable as either the welfare-maximizing research subsidy or the welfare-maximizing mandate to use renewable resources.- Reproduced <br/><br/>https://www.aeaweb.org/articles?id=10.1257/mac.20200369<br/>