Backstop resources

Abstract: The limits imposed on economic growth by resource scarcity can be alleviated only by the development of backstop substitutes, hence the intricate relationship between growth, scarcity and R&D in backstop technologies This work attempts to unfold this intricacy by combining growth based on natural and backstop resources with R&D activities that gradually reduce the backstop cost We classify prototypical economies in terms of their production technology, learning ability and time preferences Depending on the economy’s type and capital endowment, we find a wide variety of optimal R&D and capital formation processes, ranging from cases where R&D diverts an economy that otherwise would consume its entire capital onto a path of sustained growth, to cases where R&D is unwarranted JEL Classification: C61, D92, O13, O32, Q32

Abstract: In this paper, we consider an economy having access to two different energy sources. The first one is coming from natural polluting resources; and second one is coming from a backstop natural resource. There are two productive sectors in the economy. The first one is dedicated to manufacturing the backstop resources; the second one is devoted to production of the consumption good. Both sectors are dirty in the sense that both use the polluting resource at any time. The social planner, however, has always the possibility of paying an irreversible fixed cost to switch the consumption sector towards the use of a cleaner technology. Additionally, we assume that the accumulation of the backstop, and the increase in pollution stock are stochastic. Our results imply that the incentives to switch to the cleaner technology depend on the relative importance of fossil fuels in the production of consumption goods after the switch. We also find that technological improvement in the solar panels sector is of some importance in order to switch to cleaner technologies.