Kevin Genna

phd seminar

Kevin Genna

Capital Inertia and the timing of the energy transition

IBD Salle 16

Îlot Bernard du Bois - Salle 16

5-9 boulevard Maurice Bourdet
13001 Marseille

Tuesday, January 14 2020| 12:45pm to 1:30pm

Anushka Chawla: anushka.chawla[at]
Laura Sénécal: laura.senecal[at]
Carolina Ulloa Suarez: carolina.ulloa-suarez[at]


Use of fossil energies has a significant impact on climate change but our industrial legacy creates frictions and inertia toward energy transition. In order to investigate the importance of inertia in the energy sector I use a multi-sector vintage capital model à la Krusell (1998) with climate economics to study timing of optimal energy transition. I include an exogenous technology differential between renewable and fossil sector, that will be the engine of growth. The vintage structure is used to modelize 2 important features of the energy sector: embodied technical change and long lifetime of power plants. Data show that about 85% of the world energy mix is based on fossil fuels, which will have non-negligible consequences on the transitional pattern. Preliminary results highlight that fossil energies will continue to grow in the short run and will then decrease in the long-run. The presence of capital inertia creates frictions to move quickly from fossil energies to renewable one, even with exogenous growth in favor of the clean sector and damages from the use of non-renewable energies. The last part of the paper will try do deal with the power plant dynamic in US using NEEDS dataset.