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

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  • Saam, Marianne
  • Papageorgiou, Chris
  • Schulte, Patrick

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.

Suggested Citation

  • Saam, Marianne & Papageorgiou, Chris & Schulte, Patrick, 2014. "Elasticity of Substitution between Clean and Dirty Energy Inputs - A Macroeconomic Perspective," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100414, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc14:100414
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    2. Hémous, David, 2016. "The dynamic impact of unilateral environmental policies," Journal of International Economics, Elsevier, vol. 103(C), pages 80-95.
    3. Carrara, Samuel & Marangoni, Giacomo, 2017. "Including system integration of variable renewable energies in a constant elasticity of substitution framework: The case of the WITCH model," Energy Economics, Elsevier, vol. 64(C), pages 612-626.
    4. Andreas Schaefer, 2017. "Enforcement of Intellectual Property, Pollution Abatement, and Directed Technical Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 457-480, March.
    5. Meng, Sam & Siriwardana, Mahinda & McNeill, Judith & Nelson, Tim, 2018. "The impact of an ETS on the Australian energy sector: An integrated CGE and electricity modelling approach," Energy Economics, Elsevier, vol. 69(C), pages 213-224.
    6. van den Bijgaart, Inge, 2017. "The unilateral implementation of a sustainable growth path with directed technical change," European Economic Review, Elsevier, vol. 91(C), pages 305-327.
    7. Peter Almström & Christer Anderstig & Marcus Sundberg, 2024. "Effects on sectors and regions of a carbon tax increase in Sweden: analysis with an SCGE model," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 73(2), pages 731-756, August.
    8. Jacobs, Bas & van der Ploeg, Frederick, 2019. "Redistribution and pollution taxes with non-linear Engel curves," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 198-226.
    9. van den Bijgaart, Inge, 2016. "Essays in environmental economics and policy," Other publications TiSEM 298bee2a-cb08-4173-9fe1-8, Tilburg University, School of Economics and Management.
    10. Jianting Lin & Changxin Xu, 2017. "The Impact of Environmental Regulation on Total Factor Energy Efficiency: A Cross-Region Analysis in China," Energies, MDPI, vol. 10(10), pages 1-17, October.

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    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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