Explaining slow diffusion of energy-saving technologies; a vintage model with returns to diversity and learning-by-using

Abstract

This paper studies the adoption and diffusion of energy-saving technologies in a vintage model. An important characteristic of the model is that vintages are modeled as being complementary: there are returns to diversity of using different vintages. We analyse how diffusion patterns and adoption behaviour are affected by complementarity and learning-by-using. It is shown that the stronger the complementarity between different vintages and the stronger the learning-by-using, the longer it takes before firms scrap (seemingly) inferior technologies. We argue that this is a potentially relevant part of the explanation of the energy-efficiency paradox. Furthermore we explore the effects of energy tax policies.

Explaining the diffusion of renewable energy technology in developing countries

“…A good example of this can be found in the electricity sector, where hydropower, unlike thermal power, is characterized by relatively high fixed costs but low variable costs (Von der Fehr and Sandsbråten 1997). These kind of considerations lead to a mix of interdependent and thus complementary technologies, with agents continually investing in the improvement of distinct pieces of the whole technological puzzle -instead of replacing the whole thing at once (see, for example, Antonelli 1993;Colombo and Mosconi 1995;Jovanovic and Stolyarov 2000;Milgrom et al 1991;Mulder et al 2003). Canton et al 2002;Krusell and Ríos-Rull 1996;Mokyr 1992).…”

Energy, the Environment, and Technological Change

“…At a more aggregate level, there has been much discussion of the question of whether it is possible for developing countries to take less environmentally damaging paths of development than have currently industrialized countries, for example, by relying less on fossil fuels. In a theoretical study, Mulder et al (2003) use a vintage model to consider the adoption of energy-efficiency technologies. They assume complementarities among technologies, so that there are returns to using technologies from a mix of vintages.…”

Analysis of ESCO Activities Using Country Indicators

“…Popp et al (2009) prepared an excellent review scrutinizing the role of technological change on environmental economics for the forthcoming Handbook of Economics of Technical Change. In this review, some significant works cited in conjunction with the relationships among innovation (technological change), energy efficiency, and energy saving are: Mountain et al (1989), Sterner (1990), Berndt et al (1993), Newell et al (1999), Popp (2001), Nijkamp et al (2001), Popp (2002), Mulder et al (2003), Anderson and Newell (2004), Linn (2008), and Sue Wing (2008). Some of the conclusions of these works are i) the technology is energy saving; ii) energy patents leads to long-run energy savings; iii) science and technology (S&T) takeoff should have an energy-saving bias resulting in lower energy prices, however, this leads to more economic growth and greater energy consumption by households, so that the net effect of the S&T takeoff is greater energy use and more emissions; iv) increase in the price of energy leads to technology adoption that negligibly reduces energy demand; v) energy prices and regulatory standards affect energy-efficiency-related innovation; and vi) economic barriers affect adoption of energyefficiency technology more than financial and uncertainty barriers.…”