The green transition is the process of gradual transformation of production methods and consumption habits, which consubstantiates on the progressive replacement of brown goods (produced with polluting technologies) by green goods (produced with clean technologies). Underlying such transition is the complementarity between firms and households: firms go green because they want and need to adapt to changes in consumers' preferences, and these preferences or values will evolve with the transformation of the production paradigm. In this paper, a dynamic model of green transition, grounded on agent heterogeneity and interaction, is devised, and the respective dynamics are subject to analysis and discussion. The analysis suggests the formation of an unstable steady state, from which the economy is pulled away in the direction of one of two extreme outcomes: no transition or full transition to the green state. Under certain conditions (i.e., under certain parameterizations), the persistence of endogenous fluctuations is also a feasible outcome. In this case, complex patterns of green transition emerge, attached to the absence of a strong enough lock-in effect: systematic oscillations in households' values and firms' technologies, from brown to green and from green to brown, eventually become the norm. • The paper investigates the dynamics of a novel model of green transition. • The model relies on agent heterogeneity and interaction. • The policy goal is to replace brown with green (technologies and goods). • The right policy mix might guarantee the stability of the green equilibrium. • The economy may end up stuck in a bounded instability (endogenous cycles) outcome.
Orlando Gomes (Sun,) studied this question.