Energy Transitions: Directed Technical Change Meets Directed Extraction
12:00 - 13:30
Industrial economies have undergone multiple transitions in their dominant energy input: from biomass to coal, then from coal to oil, and now perhaps from oil to natural gas. I develop a setting in which specialized machines must be used to convert different types of resources into useful energy. I show that regular transitions between dominant resources arise endogenously when innovation and extraction are both directed to the most profitable resource. I also formalize a novel market transformation motive for the common policies that mandate use of renewable energy: seemingly small mandates can redirect innovation towards renewable energy, and the resulting improved technology can eventually generate a transition to renewable energy.