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Cutting costs of catching carbon—Intertemporal effects under imperfect climate policy

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  • Hoel, Michael
  • Jensen, Svenn
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    Abstract

    We use a two-period model to investigate intertemporal effects of cost reductions in climate change mitigation technologies for the power sector. The effect of cost reductions for CCS depends on how carbon taxes are set. If there is no carbon tax in period 1, but an optimally set carbon tax in period 2, a CCS cost reduction may reduce early emissions. Such an innovation may therefore be more desirable than comparable cost cuts related to renewable energy. The finding rests on the incentives fossil fuel owners face. If future profitability is reduced, they speed up extraction (the ‘green paradox’), and vice versa.

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    Bibliographic Info

    Article provided by Elsevier in its journal Resource and Energy Economics.

    Volume (Year): 34 (2012)
    Issue (Month): 4 ()
    Pages: 680-695

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    Handle: RePEc:eee:resene:v:34:y:2012:i:4:p:680-695

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    Web page: http://www.elsevier.com/locate/inca/505569

    Related research

    Keywords: Climate change; Exhaustible resources; Carbon capture and storage; Renewable energy; Green paradox;

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    References

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    Cited by:
    1. Walsh, D.M. & O'Sullivan, K. & Lee, W.T. & Devine, M.T., 2014. "When to invest in carbon capture and storage technology: A mathematical model," Energy Economics, Elsevier, vol. 42(C), pages 219-225.
    2. Hendrik Ritter & Mark Schopf, 2013. "Unilateral Climate Policy: Harmful or even Disastrous?," Working Papers CIE 62, University of Paderborn, CIE Center for International Economics.
    3. repec:pdn:wpaper:62 is not listed on IDEAS
    4. Mark Schopf & Hendrik Ritter, 2012. "Reassessing the Green Paradox," FEMM Working Papers 120013, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    5. repec:pdn:wpaper:63 is not listed on IDEAS
    6. Daniel Nachtigall & Dirk Rübbelke, 2014. "The Green Paradox and Learning-by-Doing in the Renewable Energy Sector," CESifo Working Paper Series 4880, CESifo Group Munich.
    7. Durmaz, Tunç & Schroyen, Fred, 2013. "Evaluating Carbon Capture and Storage in a Climate Model with Directed Technical Change," Discussion Paper Series in Economics 14/2013, Department of Economics, Norwegian School of Economics.
    8. Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2012. "The Role of Carbon Capture and Sequestration Policies for Climate Change Mitigation," CESifo Working Paper Series 3834, CESifo Group Munich.
    9. Rübbelke, Dirk & Vögele, Stefan, 2013. "Effects of carbon dioxide capture and storage in Germany on European electricity exchange and welfare," Energy Policy, Elsevier, vol. 59(C), pages 582-588.
    10. Niko Jaakkola, 2013. "Monopolistic Sequestration of European Carbon Emissions," OxCarre Working Papers 098, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    11. Daniel Nachtigall & Dirk Rübbelke, 2013. "The Green Paradox and Learning-by-doing in the Renewable Energy Sector," Working Papers 2013-09, BC3.

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