Energy Conversion Rate Improvements, Pollution Abatement Efforts and Energy Mix: The Transition toward the Green Economy under a Pollution Stock Constraint

Amigues, Jean-Pierre and Moreaux, Michel (2019) Energy Conversion Rate Improvements, Pollution Abatement Efforts and Energy Mix: The Transition toward the Green Economy under a Pollution Stock Constraint. TSE Working Paper, n. 19-994, Toulouse

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Abstract

To prevent climate change, three options are currently considered: improve the energy conversion efficiency of primary energy sources, develop
carbon free alternatives to polluting fossil fuels and abate potential emissions before they are released inside the atmosphere. We study the optimal
mix and timing of these three mitigation options in a stylized dynamic model. Useful energy can come from two sources: a non-renewable fossil fuel resource
and a carbon free renewable resource. The conversion efficiency rate of fossil energy into useful energy is open to choice but higher conversion rates are also
more costly. The economy can abate some fraction of its potential emissions and a higher abatement rate incurs higher costs. The society objective is to
maintain below some mandated level, or carbon cap, the atmospheric carbon concentration. In the empirically relevant case where the economy is actually
constrained by the cap, at least temporarily, we show that the optimal path is a sequence of four regimes: a ’pre-ceiling’ regime before the economy is
actually constrained by the cap, a ’ceiling’ regime at the cap, a ’post-ceiling’ regime below the cap and a final regime of exclusive exploitation of renewable
resources. If the abatement option has ever to be used, it should be started before the beginning of the ceiling regime, first at an increasing rate and at
a decreasing rate once the cap constraint binds. The efficiency performance from any source steadily improves with the exception of a time phase under
the ceiling regime when it is constant. Renewables take progressively a larger share of the energy mix but their exploitation may be delayed significantly.
Absolute levels of carbon emissions drop down continuously but follow a non monotonic pattern in per useful energy unit relative terms.To prevent climate change, three options are currently considered: improve the energy conversion efficiency of primary energy sources, develop
carbon free alternatives to polluting fossil fuels and abate potential emissions before they are released inside the atmosphere. We study the optimal
mix and timing of these three mitigation options in a stylized dynamic model. Useful energy can come from two sources: a non-renewable fossil fuel resource
and a carbon free renewable resource. The conversion efficiency rate of fossil energy into useful energy is open to choice but higher conversion rates are also
more costly. The economy can abate some fraction of its potential emissions and a higher abatement rate incurs higher costs. The society objective is to
maintain below some mandated level, or carbon cap, the atmospheric carbon concentration. In the empirically relevant case where the economy is actually
constrained by the cap, at least temporarily, we show that the optimal path is a sequence of four regimes: a ’pre-ceiling’ regime before the economy is
actually constrained by the cap, a ’ceiling’ regime at the cap, a ’post-ceiling’ regime below the cap and a final regime of exclusive exploitation of renewable
resources. If the abatement option has ever to be used, it should be started before the beginning of the ceiling regime, first at an increasing rate and at
a decreasing rate once the cap constraint binds. The efficiency performance from any source steadily improves with the exception of a time phase under
the ceiling regime when it is constant. Renewables take progressively a larger share of the energy mix but their exploitation may be delayed significantly.
Absolute levels of carbon emissions drop down continuously but follow a non monotonic pattern in per useful energy unit relative terms.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2019
Place of Publication: Toulouse
Uncontrolled Keywords: energy efficiency, carbon pollution, non-renewable resources, renewable resources, abatement.
JEL codes: Q00 - General
Q32 - Exhaustible Resources and Economic Development
Q43 - Energy and the Macroeconomy
Q54 - Climate; Natural Disasters
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 08 Mar 2019 10:40
Last Modified: 19 Mar 2019 13:53
OAI ID: oai:tse-fr.eu:122842
URI: http://publications.ut-capitole.fr/id/eprint/31942

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