Elasticity of Substitution between Clean and Dirty Energy Inputs - A Macroeconomic Perspective

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Abstract Recently Acemolgu, Aghion, Bursztyn and Hemous (AER 2012) formulated a model in which a high macroeconomic elasticity of substitution between clean and dirty production represents a crucial condition for green growth. Until now it has never been systematically estimated. Using a novel panel of cross-country sectoral data, we formulate specifications of nested CES production functions that allow to estimate a special case of this parameter: the elasticity of substitution between clean and dirty energy inputs. Contrary to what is expected based on the earlier interfuel substitution literature, we find evidence that this elasticity exceeds one.JEL Classification: O44; O47; Q54; Q58.

The Unilateral Implementation of a Sustainable Growth Path with Directed Technical Change

“…This may 15 Results for alternative β s are available on request. 16 This value is in line with the findings by Papageorgiou et al (2013). seem counterintuitive at first, but is a direct consequence of the fact that home and foreign scientists are perfect substitutes, with equal productivity, in innovation (see (7)).…”

“…The production of each machine requires ψ > 0 units of the final good Y kt and is 5 This is confirmed by the recent results in Papageorgiou et al (2013). 6 For β → 0, the production function approaches the intermediates production function in Acemoglu et al (2012), where, in equilibrium, output is CRS to labor.…”

“…15 Acemoglu et al (2012) use three different values for the elasticity of substitution between clean and dirty varieties: 3, 5 and 10. Several researchers (Pelli, 2011;Hourcade et al, 2012;Papageorgiou et al, 2013) regard these elastiticies of substitution as (too) high. To acknowledge this critique, we select the lowest value of the three values: ε = 3.…”

Climate Policy and Innovation: A Quantitative Macroeconomic Analysis

“…This parameter is particularly difficult to pin down because of the lack of aggregate data on green energy prices and quantities. Values of similar parameters used in integrated assessment and macroeconomic models typically range from unity to ten (Lanzi and Sue Wing 2010; AABH) while empirical estimates from Lanzi and Sue Wing (2010) and Papageorgiou, Saam, and Schulte (2013) range from 1.6-3. Section IVD considers robustness analysis for different values of ε e .…”

Multiple Collaborative Displacement Transaction and Compensation Mechanism Research on Promoting Renewable Energy Consumption

“…Many scholars have made related research on energy displacement and compensation mechanism. In terms of energy displacement, by establishing a model of the elasticity of substitution between cleaner production and non-clean production based on green economic growth, Literature [1] proved the elasticity of substitution between clean energy and non-clean energy input is greater than one. That means that there is a good alternative1.…”