TY - JOUR
T1 - Carbon Lock-In: The Role of Expectations
AU - van der Meijden, G.C.
AU - Smulders, S.
PY - 2017/11
Y1 - 2017/11
N2 - We 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.
AB - We 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.
UR - https://www.scopus.com/pages/publications/85031117312
UR - https://www.scopus.com/inward/citedby.url?scp=85031117312&partnerID=8YFLogxK
U2 - 10.1111/iere.12255
DO - 10.1111/iere.12255
M3 - Article
SN - 0020-6598
VL - 58
SP - 1371
EP - 1415
JO - International Economic Review
JF - International Economic Review
IS - 4
ER -