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Cycles in nonrenewable resource prices with pollution and learning-by-doing

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Author Info

  • Chakravorty, Ujjayant
  • Leach, Andrew
  • Moreaux, Michel

Abstract

We study how environmental regulation in the form of a cap on aggregate emissions from a fossil fuel (e.g., coal) interacts with the arrival of a clean substitute (e.g., solar energy). The cost of the substitute is assumed to decrease with cumulative use because of learning-by-doing. We show that optimal energy prices may initially increase because of pollution regulation, but fall due to learning, and rise again because of scarcity of the resource, finally falling after transition to the clean substitute. Thus nonrenewable resource prices may exhibit cyclical behavior even in a purely deterministic setting.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 36 (2012)
Issue (Month): 10 ()
Pages: 1448-1461

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Handle: RePEc:eee:dyncon:v:36:y:2012:i:10:p:1448-1461

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Web page: http://www.elsevier.com/locate/jedc

Related research

Keywords: Climate change; Energy markets; Environmental externalities; Nonrenewable resources; Technological change;

References

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  5. Ujjayant Chakravorty & Bertrand Magne & Michel Moreaux, 2006. "A Hotelling model with a ceiling on the stock of pollution," Working Papers 25547, Institut National de la Recherche Agronomique, France.
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  8. Bramoulle, Yann & Olson, Lars J., 2005. "Allocation of pollution abatement under learning by doing," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1935-1960, September.
  9. Gerlagh, Reyer & van der Zwaan, Bob, 2003. "Gross world product and consumption in a global warming model with endogenous technological change," Resource and Energy Economics, Elsevier, vol. 25(1), pages 35-57, February.
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  11. Olli Tahvonen, 1997. "Fossil Fuels, Stock Externalities, and Backstop Technology," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 855-74, November.
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  14. Popp, David, 2006. "ENTICE-BR: The effects of backstop technology R&D on climate policy models," Energy Economics, Elsevier, vol. 28(2), pages 188-222, March.
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  17. McDonald, Alan & Schrattenholzer, Leo, 2001. "Learning rates for energy technologies," Energy Policy, Elsevier, vol. 29(4), pages 255-261, March.
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Citations

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Cited by:
  1. Daniel Nachtigall & Dirk Rübbelke, 2013. "The Green Paradox and Learning-by-doing in the Renewable Energy Sector," Working Papers 2013-09, BC3.
  2. Hoel, Michael, 2013. "Supply Side Climate Policy and the Green Paradox," Memorandum 03/2013, Oslo University, Department of Economics.
  3. E. Agliardi & L. Sereno, 2012. "On the optimal timing of switching from non-renewable to renewable resources: dirty vs clean energy sources and the relative efficiency of generators," Working Papers wp855, Dipartimento Scienze Economiche, Universita' di Bologna.
  4. Michael Hoel, 2013. "Supply Side Climate Policy and the Green Paradox," CESifo Working Paper Series 4094, CESifo Group Munich.
  5. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2014. "Triggering the Technological Revolution in Carbon Capture and Sequestration Costs," TSE Working Papers 14-479, Toulouse School of Economics (TSE).
  6. Kollenbach, Gilbert, 2013. "Endogenous Growth with a Ceiling on the Stock of Pollution," MPRA Paper 50641, University Library of Munich, Germany.
  7. James Roumasset & Christopher Wada, 2014. "Energy, backstop endogeneity, and the optimal use of groundwater," Working Papers 201417, University of Hawaii at Manoa, Department of Economics.

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