The Grey Paradox: How Oil Owners Can Benefit From Carbon Regulation
AbstractThis paper studies how oil owners can benefit from carbon taxation. We build a Hotelling-like model with three energy resources: oil (exhaustible, polluting), coal (non exhaustible, very polluting) and solar energy (non exhaustible, non polluting). The CO2 concentration must be kept under a carbon ceiling. The optimal extraction path is decentralized by a tax on emissions, and tax revenues are not redistributed. We characterize the different extraction paths. We focus on the case where both oil and coal are extracted and oil gets exhausted. When oil is cheaper to extract than coal, if oil is sufficiently scarce, or if the extraction cost of oil is close enough to the extraction cost of coal or if its pollution content is low enough, or if the demand elasticity is low enough, the profits of oil owners will increase when the carbon regulation is tightened. When oil is more expensive to extract than coal, and both resources are used and oil exhausted, tightening the carbon regulation increases the oil profits.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series PSE Working Papers with number hal-00818350.
Date of creation: Apr 2013
Date of revision:
Note: View the original document on HAL open archive server: http://hal-pjse.archives-ouvertes.fr/hal-00818350
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
Optimal Taxation ; Carbon Regulation ; Global Warming ; Nonrenewable Resources ; OPEC; Fossil Fuels ; Energy Markets;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-22 (All new papers)
- NEP-ENE-2013-05-22 (Energy Economics)
- NEP-ENV-2013-05-22 (Environmental Economics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Oskar Lecuyer & Adrien Vogt-Schilb, 2013. "Assessing and ordering investments in polluting fossil-fueled and zero-carbon capital," Working Papers hal-00850680, HAL.
- Oskar Lecuyer & Adrien Vogt-Schilb, 2013. "Assessing and ordering investments in polluting fossil-fueled and zero-carbon capital," Working Papers hal-00866442, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.