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Energy Transitions: Directed Technical Change Meets Directed Extraction
Industrial economies have undergone multiple transitions in their dominant energy input and have committed to stimulating a new transition away from fossil energy inputs. I develop a theoretical setting in which the directions of resource extraction and innovation are endogenous and complementary. The resulting positive feedbacks between innovation and extraction generate regular transitions between dominant resources. Consistent with history, transitions in innovation lead transitions in extraction. Policies that mandate use of renewable energy can generate a future transition in resource use: seemingly small mandates can redirect innovation towards renewable energy, and the improvements in technology eventually make the mandate irrelevant.
Saieh Hall for Economics, Room 021