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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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  1. 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.
  2. 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.
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  5. 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.
  6. Tsur, Yacov & Zemel, Amos, 2005. "Scarcity, growth and R&D," Journal of Environmental Economics and Management, Elsevier, vol. 49(3), pages 484-499, May.
  7. 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.
  8. 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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  11. Snorre Kverndokk, 1994. "Depletion of Fossil Fuels and the impact of Global Warming," Discussion Papers 107, Research Department of Statistics Norway.
  12. Rubio, Santiago J. & Escriche, Luisa, 2001. "Strategic pigouvian taxation, stock externalities and polluting non-renewable resources," Journal of Public Economics, Elsevier, vol. 79(2), pages 297-313, February.
  13. Amigues, Jean-Pierre & Moreaux, Michel, 2011. "The atmospheric carbon resilience problem : A theoretical analysis," LERNA Working Papers 11.08.342, LERNA, University of Toulouse.
  14. Kverndokk, Snorre & Rosendahl, Knut Einar, 2007. "Climate policies and learning by doing: Impacts and timing of technology subsidies," Resource and Energy Economics, Elsevier, vol. 29(1), pages 58-82, January.
  15. McDonald, Alan & Schrattenholzer, Leo, 2001. "Learning rates for energy technologies," Energy Policy, Elsevier, vol. 29(4), pages 255-261, March.
  16. Dasgupta, Partha & Gilbert, Richard J & Stiglitz, Joseph E, 1982. "Invention and Innovation under Alternative Market Structures: The Case of Natural Resources," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 567-82, October.
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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. Kollenbach, Gilbert, 2013. "Endogenous Growth with a Ceiling on the Stock of Pollution," MPRA Paper 50641, University Library of Munich, Germany.
  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. Hoel, Michael, 2013. "Supply Side Climate Policy and the Green Paradox," Memorandum 03/2013, Oslo University, Department of Economics.
  5. Michael Hoel, 2013. "Supply Side Climate Policy and the Green Paradox," CESifo Working Paper Series 4094, CESifo Group Munich.

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