In most climate models the elasticity of substitution between green and dirty energy is presumed static. So, what happens if we augment a climate-macro model with a storage technology that improves the elasticity of substitution? How would this type of innovation compare to reducing renewable energy costs and affect optimal policy outcomes? We will investigate how increasing the elasticity of substitution between fossil fuels and renewable energy over time can mitigate increases in the global mean temperature and losses in consumption due to climate change. To do this, we will construct a quantitative integrated assessment model (IAM) to study the effects of climate policy and energy-related technological progress across world regions.
Professor of Economics
Jesús Fernández-Villaverde is a professor of economics and research associate for the National Bureau of Economic Research (NBER) and Penn’s Population Studies Center, and a Research Affiliate for the Centre for Economic Policy Research.