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Neoclassical Growth, Environment and Technological Change: The Environmental Kuznets Curve

Santiago J. Rubio, Jose L. Garcia and Jose L. Hueso

Year: 2009
Volume: Volume 30
Number: Special Issue #2
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-NoSI2-7
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Abstract:
This paper investigates socially optimal patterns of economic growth and environmental quality in a neoclassical growth model with endogenous technological progress. In the model, environmental quality has a positive effect not only on utility but also on production. Moreover, cleaner technologies can be used in the economy if a part of the output is used in environmentally oriented R&D. In this framework, if the initial level of capital is low, then the shadow price of a cleaner technology is low in relation to the cost of developing it, given by the marginal utility of consumption, and it is not worth investing in R&D. Thus, there will be a first stage of growth based only on the accumulation of capital with environmental quality decreasing until there is enough pollution to make investing in R&D profitable. After this turning point, if the new technologies are efficient enough, the economy can evolve along a balanced growth path with increasing environmental quality. The result is that the optimal investment pattern supports an environmental Kuznets curve.



Grid Investment and Support Schemes for Renewable Electricity Generation

Johannes Wagner

Year: 2019
Volume: Volume 40
Number: Number 2
DOI: 10.5547/01956574.40.2.jwag
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Abstract:
The unbundling of formerly vertically integrated utilities in liberalized electricity markets led to a coordination problem between investments in the regulated electricity grid and investments into new power generation. At the same time investments into new generation capacities based on weather dependent renewable energy sources such as wind and solar energy are increasingly subsidized with different support schemes. Against this backdrop this article analyzes the locational choice of private wind power investors under different support schemes and the implications on grid investments. I find that investors do not choose system optimal locations in feed-in tariff schemes, feed-in premium schemes and subsidy systems with direct capacity payments. Consequently, inefficiencies arise if transmission investment follows wind power investment. A benevolent transmission operator can implement the first-best solution by anticipatory investment behavior, which is however only applicable under perfect regulation. Alternatively a location dependent network charge for wind power producers can directly influence investment decisions and internalize the grid integration costs of wind power generation.





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