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The Role of Knowledge: Technological Innovation in the Energy System

Robert W. Fri

Year: 2003
Volume: Volume24
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol24-No4-3
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Abstract:
Technological innovation will continue to be essential in the energy system for both economic and public policy reasons. The process of innovation is typically incremental, cumulative, and assimilative. Innovation may produce revolutionary outcomes through the accumulation of small steps, or because it introduces new performance characteristics that the market values. In some circumstances, public policy intervention to overcome obstacles to innovation may be justified to secure public benefits. One obstacle is that innovators may be unable to capture all of the available economic benefits of innovation. Another is that economic benefits may not be available and the value of the public good has not been internalized in the market. Experience with energy innovation suggests government intervention works best when it is carefully targeted on specific obstacles. Why some government policies have not been successful and suggestions for new policy approaches that might be useful are also discussed.



Fueling Innovation: The Impact of Oil Prices and CAFE Standards on Energy-Efficient Automotive Technology

Joseph M. Crabb and Daniel K.N. Johnson

Year: 2010
Volume: Volume 31
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No1-9
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Abstract:
This paper tests the induced innovation hypothesis that higher oil prices will lead to increased innovation in energy-efficient automotive technology. Using a dynamic model of patenting, we find robust empirical support for the hypothesis, concluding that both the acquisition cost and retail markup portion of fuel prices are powerful in generating subsequent innovation. Our results include the effects of CAFE regulations, finding no evidence of their impact on innovation, even within a model that endogenizes them via fuel price expectations.



Energy Sector Innovation and Growth: An Optimal Energy Crisis

Peter Hartley, Kenneth B. Medlock III, Ted Temzelides, Xinya Zhang

Year: 2016
Volume: Volume 37
Number: Number 1
DOI: 10.5547/01956574.37.1.phar
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Abstract:
We study the optimal transition from fossil fuels to renewable energy in a neoclassical growth economy with endogenous technological progress in energy production. Innovations keep fossil energy costs under control even as increased exploitation raises mining costs. Nevertheless, the economy transitions to renewable energy after about 80% of available fossil fuels are exploited. The energy shadow price remains more than double current values for over 75 years around the switch time. Consumption and output growth decline sharply during the transition period, which we thus identify as an "energy crisis." The model highlights the important role energy can play in influencing economic growth.



The Impact of Energy Prices on Green Innovation

Marius Ley, Tobias Stucki, and Martin Woerter

Year: 2016
Volume: Volume 37
Number: Number 1
DOI: 10.5547/01956574.37.1.mley
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Abstract:
Based on patent data and industry specific energy prices for 18 OECD countries over 30 years we investigate on an industry level the impact of energy prices on green innovation activities. Our econometric models show that energy prices and green innovation activities are positively related and that energy prices have a significantly positive impact on the ratio of green innovations to non-green innovations. More concretely, our main model shows that a 10% increase of the average energy prices over the previous five years results in a 3.4% and 4.8% increase of the number of green innovations and the ratio of green innovations to non-green innovations, respectively. We also find that the impact of energy prices increases with an increasing lag between energy prices and innovation activities. Robustness tests confirm the main results.



Nuclear Phase-out Under Stringent Climate Policies: A Dynamic Macroeconomic Analysis

Lucas Bretschger and Lin Zhang

Year: 2017
Volume: Volume 38
Number: Number 1
DOI: 10.5547/01956574.38.1.lbre
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Abstract:
In this paper we investigate the long-run economic consequences of phasing out nuclear energy in the presence of stringent climate policies. We integrate endogenous growth theory and technology-based activity analysis into a dynamic numerical general equilibrium model. Both market-based and policy-mandated nuclear phase-out are studied. Using data from the Swiss economy we find that the aggregate welfare loss of carbon policy is as large as 1.21% and that nuclear phase-out raises the loss to 1.58%. Nuclear phase-out has no significant effect on economic growth. Increased investment, induced innovation, and sectoral change are the reasons that the economic impact of nuclear phase-out and the trade-off between energy and climate policy are moderate, once the dynamics of an economy are taken into account. Optimal phase-out time for nuclear depends mainly on future cost escalation in the energy sector. Keywords: Energy and growth, Decarbonization, Nuclear phase out, CGE model, Induced innovation



The Valley of Death for New Energy Technologies

Peter R. Hartley and Kenneth B. Medlock III

Year: 2017
Volume: Volume 38
Number: Number 3
DOI: 10.5547/01956574.38.3.phar
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Abstract:
It is often claimed that a difficulty of raising investment funds prevents promising new energy technologies from attaining commercial viability. We examine this issue using a dynamic intertemporal model of the displacement of fossil fuel energy technologies by non-fossil alternatives. Our model highlights the fact that since capital used to produce energy services from fossil fuels is a sunk cost, it will continue to be used so long as the price of energy covers merely short-run operating costs. Until fossil fuels are abandoned, the price of energy is insufficient to cover even the operating costs of renewable energy production, let alone provide a competitive return on the capital employed. The full long-run costs of renewable energy production are not covered until some time after fossil fuels are abandoned.



Green Inventions: Is Wait-and-see a Reasonable Option?

Tobias Stucki and Martin Woerter

Year: 2017
Volume: Volume 38
Number: Number 4
DOI: 10.5547/01956574.38.4.tstu
View Abstract

Abstract:
We analyze the potential of different knowledge stocks to decrease the technological gap between the leader in green technology inventions and its followers in order to identify if wait-and-see is a reasonable option to benefit from knowledge. Our econometric results indicate that it is difficult to decrease the technological gap and remain competitive in the generation of green technologies without timely accumulating green knowledge. Although effects from external green knowledge stocks also contribute to decrease the technological gap, the effects are moderate and they cannot compensate the lack of internal green competences. Non-green knowledge stocks even tend to increase the technological gap.



Inter-temporal R&D and capital investment portfolios for the electricity industry’s low carbon future

Nidhi R. Santen, Mort D. Webster, David Popp, and Ignacio Pérez-Arriaga

Year: 2017
Volume: Volume 38
Number: Number 6
DOI: https://doi.org/10.5547/01956574.38.6.nsan
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Abstract:
A pressing question facing policy makers today in developing a long-term strategy to manage carbon emissions from the electric power sector is how to appropriately balance investment in R&D for driving innovation in emerging low-and zero-carbon technologies with investment in commercially available technologies for meeting existing energy needs. Likewise, policy makers need to determine how to allocate limited funding across multiple technologies. Unfortunately, existing modeling tools to study these questions lack a realistic representation of electric power system operations, the innovation process, or both. In this paper, we present a new modeling framework for long-term R&D and electricity generation capacity planning that combines an economic representation of endogenous non-linear technical change with a detailed representation of the power system. The model captures the complementary nature of technologies in the power sector; physical integration constraints of the system; and the opportunity to build new knowledge capital as a non-linear function of R&D and accumulated knowledge, reflective of the diminishing marginal returns to research inherent in the energy innovation process. Through a series of numerical experiments and sensitivity analyses - with and without carbon policy - we show how using frameworks that do not incorporate these features can over-or under-estimate the value of different emerging technologies, and potentially misrepresent the cost-effectiveness of R&D opportunities.



Vehicle Lifetime Trends and Scrappage Behavior in the U.S. Used Car Market

Antonio Bento, Kevin Roth, and Yiou Zuo

Year: 2018
Volume: Volume 39
Number: Number 1
DOI: 10.5547/01956574.39.1.aben
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Abstract:
Using national data on vehicles in operation, we examine long-run changes in scrappage patterns in passenger cars and light trucks in the United States between 1969 and 2014. We find that the average lifetime for passenger cars has increased from 12.2 to 15.6 years between 1970s and the 2000s. Our central estimate of the elasticity of scrappage with respect to vehicle prices is -0.4, which is substantially different than values adopted in simulation models. These estimates imply that many policies aimed at reducing gasoline consumption, including Corporate Average Fuel Economy standards and gasoline taxes may produce changes in the used vehicle market that are different than prior studies suggest. We also note that consumer scrappage behavior seems to respond more strongly to changes in vehicle price than changes in gasoline price than standard theory would predict.



European Industrial Energy Intensity: Innovation, Environmental Regulation, and Price Effects

Victor Ajayi and David Reiner

Year: 2020
Volume: Volume 41
Number: Number 4
DOI: 10.5547/01956574.41.4.vaja
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Abstract:
We investigate the direct role of technological innovation and other factors influencing industrial energy intensity across 17 EU countries over 1995�2009. We develop an innovative industry-level patent dataset and find compelling evidence that patent stock negatively influences industrial energy intensity. In particular, we find a much stronger effect of patent stock on energy-intensive industries with an estimated coefficient of �0.138 which almost double that of less energy-intensive industries (estimated at �0.085). While our results show that energy price remains the major determinant of energy intensity, the chemicals industry, which is not covered by the EU Emissions Trading Scheme (ETS) during the sample period, appears more susceptible to energy prices relative to other energy-intensive industries that are covered by the EU ETS. Exploring regional differences in carbon taxation, we find a significant decline in energy intensity in Northern Europe owing to the carbon tax policy implemented in the early 1990s across the Nordic countries.




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