CER-ETH Research Seminar, Fall Term 2020

Everyone who is interested is cordially invited!

If you would like to receive our weekly invitation via e-mail, or if you have any other question, please contact Britz Volker at .

Speakers

Adam Dominiak

Title: Ambiguity and Growing Awareness

Abstract: --not provided by the speaker--

Aude Pommeret

(joint work with Katheline Schubert)

Title: Optimal energy transition with variable and intermittent renewable electricity generation

Abstract: We propose one of the first dynamic models of the optimal transition from fossil fuels to renewables in electricity generation that takes into account the variability and intermittency of renewable energy as well as storage. Optimal energy transition towards an intermittent energy source implies optimal regime switches under uncertainty. We determine the optimal switching dates and the optimal dynamics of the different energy sources. This work sheds light on the extent to which variability and intermittency constitute a serious obstacle to energy transition, and to the role storage can play. The results of this model provide useful insights into the complexity of transitioning to clean energy, as well as the role climate policy plays in triggering both the growth of renewables and storage. A quantitative illustration for the case of the Spanish energy transition is provided.

Ottmar Edenhofer

Title: Pigou in the Post-Covid-19-Era - A Tribute on the occasion of the 100th Anniversary of the Publication of The Economics of Welfare

Abstract: How does the Publication of “The Economics of Welfare” 100 years ago relate to present climate policy? The starting point of Ottmar Edenhofer’s lecture will be a brief introduction of the concept of Pigovian Taxation. In the following, he will discuss national policies using Germany with its recent developments as an example. Moving on to current and future EU Climate Policy, the focus of the talk will shift to the necessary transformation of the energy and transport sectors as well as the European Green Deal. To complete the picture, Ottmar Edenhofer will touch on international climate policy by explaining the three Cs and their global importance: Coal, Capital and Cooperation.

Lint Barrage

(joint work with Daron Acemoglu, Philippe Aghion, and David Hemous)

Title: Optimal energy transition with variable and intermittent renewable electricity generation

Abstract: We investigate the short- and long-term effects of a shale gas boom in an economy where energy can be produced with coal, natural gas, or clean energy sources. In the short run, cheaper natural gas has counteracting effects on CO2 emissions: on the one hand it allows substitution away from coal which reduces CO2 emissions, ceteris paribus; on the other hand the shale gas boom may increase pollution as it increases the scale of aggregate production. We then empirically document another potentially important effect, namely that the shale boom was associated with a decline in innovation in green relative to fossil fuels-based electricity generation technologies. Introducing directed technical change dynamics in our model, we derive conditions under which a shale gas boom reduces emissions in the short-run but increases emissions in the long-run by inducing firms to direct innovation away from clean towards fossil fuels innovation. We further show the possibility of an infinitely delayed switch from fossil fuels to clean energy as a result of the boom. Finally, we present a quantitative version of the model calibrated to the U.S. economy, and analyze the implications of the shale boom for optimal climate policy.

Camille Landais

Title: Retirement Consumption and Pension Design

Abstract:  --not provided by the speaker--

Frank Krysiak

Title: Coevolution of Technology and Market Structure in Green Technology Transitions

Abstract: The ultimate aim of environmental policy is the transition to a new, green technology that causes less or no environmental side effects. Such a transition requires prolonged technology development and is often accompanied by substantial changes to technology markets, where incumbents that have provided the old technology may or may not be driven out by newcomers providing the green technology. In fact, different patterns have been observed in past transitions. The phase-out of CFC-based refrigeration was achieved by incumbent firms with little changes to the market structure. The current energy transition is accompanied by substantial market changes, where incumbents are largely replaced by more competitively acting newcomers. The nascemtnt change to e-mobility has again a different pattern with incumbents that have delayed the technology transition for a long time now moving swiftly to gain a share in the new market developed by newcomers.
In this paper, we develop a theoretical model that can explain such different types of green technology transitions and that can provide some insights into environmental and policy consequences. We advance a model that describes a co-evolution of technology and market structure. A new clean technology is developed in a sequence of steps to replace an old emission-intensive technology. Each step of technology improvement can be taken by newcomers or an incumbent, the latter of which also supplies the old technology. Depending on the variants of the new technology being developed, the technology market can be perfectly competitive, oligopolistic or monopolistic, providing different opportunities to refund r&d investments.
Using this model, we show that different patterns of technology transitions can occur, some of which resemble the examples above, and that, in many cases, the incumbent can successfully block an economically desirable technology transition. Whether the transition occurs and what transition pattern emerges depends on a few key parameters, in particular, on the propensity of the new technology to attract new customers. Furthermore, different patterns of the transition lead to different levels of emissions throughout the transition. In some cases, emissions can even increase during the first stages of a green technology transition.
In terms of policy measures, we show that different patterns require different policies and that supporting new entrants might be desirable at the beginning of a technology transition but can become detrimental at later stages.