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Climate policy and the optimal extraction of high- and low-carbon fossil fuels

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  • Sjak Smulders
  • Edwin van der Werf

Abstract

flow-constraint may substitute towards the relatively dirty input. As the economy tries to maximize output per unit of emissions it is not only carbon content that matters: productivity matters as well. With an announced constraint the economy first substitutes towards the less productive input such that more of the productive input is available when constrained. Preliminary empirical results suggest that it is cost-effective to substitute away from dirty coal to cleaner oil or gas, but to substitute from natural gas towards the dirtier input oil.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 41 (2008)
Issue (Month): 4 (November)
Pages: 1421-1444

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Handle: RePEc:cje:issued:v:41:y:2008:i:4:p:1421-1444

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  1. Withagen, Cees, 1994. "Pollution and exhaustibility of fossil fuels," Resource and Energy Economics, Elsevier, vol. 16(3), pages 235-242, August.
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  1. > Environmental and Natural Resource Economics > Resource Economics
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