Substitution between Clean and Dirty Energy with Directed Technical Change

Substitution between clean and dirty inputs and directed technical change, either clean energy-augmenting or dirty energy-augmenting, lie at the center of leading economic analyses of climate policy. Despite their theoretical interconnectedness, joint empirical assessments of these two factors are scarce to date. To fill the gap in the literature, this paper jointly estimates the elasticity of substitution between clean and dirty energy and the direction of technical change. Using my estimates, I examine the historical increase in the relative share of clean energy in France, which suggests that changing factor prices were a relatively stronger driver than technical change in inducing energy transition