A Dynamic Optimal Management on Economic Energy Efficiency in Developing Countries
This paper is based on the dynamic optimization methodology to investigate the economic energy efficiency issues in developing countries. The paper introduces some definitions about energy efficiency both in economics and physics, and establishes a quantitative way for measuring the economic energy efficiency. The linkage among economic energy efficiency, energy consumption and other macroeconomic variables is demonstrated primarily. Using the methodology of dynamic optimization, a maximum problem of economic energy efficiency over time, which is subjected to the extended Solow growth model and instantaneous investment rate, is modeled. In this model, the energy consumption is set as a control variable and the capital is regarded as a state variable. The analytic solutions can be derived and the diagrammatic analysis provides saddle-point equilibrium. A numerical simulation is also presented; meanwhile, the optimal paths of investment and energy consumption can be drawn. The dynamic optimization encourages governments in developing countries to pursue higher economic energy efficiency by controlling the energy consumption and regulating the investment state as it can conserve energy without influencing the achievement of steady state in terms of Solow model. If that, a sustainable development will be achieved.
KeywordsEconomic energy efficiency Dynamic optimization Energy consumption Investment
Unable to display preview. Download preview PDF.
We thank Professor Budy Resosudarmo at ANU for his valuable critique on the model and paper writing.
- 1.Jin Y, Arons J (2009) Resource, energy, environment, society: Scientific and engineering principles for circular economy. Chemical Industry Press, Beijing (In Chineses)Google Scholar
- 2.Handbook of energy statistics (2010) National Bureau of Statistics of China. China Statistics Press, Beijing (In Chineses)Google Scholar
- 3.Stern D (2012) Modelling international trends in energy efficiency. Energy Economics 34(6):2200–2208Google Scholar
- 4.Perrot P (1998) A to Z of thermodynamics. Oxford University Press, EnglandGoogle Scholar
- 5.Stern D (2011) The role of energy in economic growth. Annals of the New York Academy of Sciences 1219(1):26–51Google Scholar
- 6.Pindyck RS (1978) The optimal exploration and production of nonrenewable resources. Journal of Political Economy 86:841–861Google Scholar
- 7.Pindyck RS (1980) Uncertainty and exhaustible resource markets. Journal of Political Economy 88(6):1203–1225Google Scholar
- 8.Chiang AC (1999) Elements of dynamic optimization. 200–204 Waveland Press, IllinoisGoogle Scholar