On the optimal timing of switching from non-renewable to renewable resources: dirty vs clean energy sources and the relative efficiency of generators

Agliardi, Elettra ; Sereno, Luigi (2012) On the optimal timing of switching from non-renewable to renewable resources: dirty vs clean energy sources and the relative efficiency of generators. Bologna: Dipartimento di Scienze economiche DSE, p. 43. DOI 10.6092/unibo/amsacta/3909. In: Quaderni - Working Paper DSE (855). ISSN 2282-6483.
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Abstract

We develop a model on the optimal timing of switching from non-renewable to renewable energy sources with endogenous extraction choices under emission taxes and abatement costs. We assume that non-renewable resources are "dirty" inputs and create environmental degradation, while renewable resources are more environmentally friendly, although they may be more or less productive than the exhaustible resources. The value of the switching option from non-renewable to renewable resources is characterized. Numerical applications show that an increase in emission taxes, abatement costs or demand elasticity slows down the adoption of substitutable renewable resources, while an increase in the natural rate of resource regeneration, the stock of renewable resources or the relative productivity parameter speeds up the investment in the green technology.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Agliardi, Elettra
Sereno, Luigi
Keywords
Non-renewable resources, Renewable resources, Environmentally friendly technologies, Abatement costs, Taxes, Optimal switching time, Real options
Subjects
ISSN
2282-6483
DOI
Deposit date
12 Dec 2013 14:10
Last modified
19 Feb 2014 08:53
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