Nuclear Energy, Economic Growth, and the Environment: Optimal policies in a model with endogenous technical change and environmental constraints

Abstract

We use a model of endogenous growth with vertical innovations, in order to derive optimal energy policy under uncertainty. Innovation can be directed to dirty, green, or nuclear technologies, which in turn can be used to produce different types of energy. We show that, nuclear energy usage, is not only a necessary welfare maximizing condition, but also a crucial determinant of economic growth in the long run. Lastly, we find no evidence supporting the traditional Environmental Kuznets Curve hypothesis under optimal policy implementation.