A Hotelling model with a ceiling on the stock of pollution
AbstractThe Kyoto Protocol aims to stabilize the concentration of carbon in the atmosphere, which is mainly caused by the burning of nonrenewable resources such as coal in power generation. We ask how a ceiling on the stock of emissions may a.ect the textbook Hotelling model. We show that when the ceiling is binding, both the low-cost nonrenewable resource (coal) and the high-cost renewable resource (solar energy) may be used jointly. Emissions may be reduced at any given time through abatement or by replacing coal with solar energy, but not both. If energy demand declines in the long run, we obtain a zigzag pattern of resource use: coal is used first, followed by the joint use of coal and clean solar energy when the ceiling is tight, reverting to coal again when emissions are no longer binding, and finally to solar energy when coal is exhausted.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 30 (2006)
Issue (Month): 12 (December)
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Web page: http://www.elsevier.com/locate/jedc
Other versions of this item:
- Ujjayant Chakravorty & Bertrand Magne & Michel Moreaux, 2003. "A Hotelling Model with a Ceiling on the Stock of Pollution," Emory Economics 0321, Department of Economics, Emory University (Atlanta).
- Chakravorty, Ujjayant & Magné, Bertrand & Moreaux, Michel, 2005. "A Hotelling Model with a Ceiling on the Stock of Pollution," IDEI Working Papers 368, Institut d'Économie Industrielle (IDEI), Toulouse.
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
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