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Would Hotelling Kill the Electric Car?

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  • Chakravorty, Ujjayant

    ()
    (University of Alberta, Department of Economics)

  • Leach, Andrew

    ()
    (University of Alberta School of Business)

  • Moreaux, Michel

    (Toulouse School of Economics)

Abstract

In this paper, we show that the potential for endogenous technological change in alternative energy sources may alter the behaviour of resource-owning firms. When technological progress in an alternative energy source can occur through learning-by-doing, resource owners face competing incentives to extract rents from the resource and to prevent expansion of the new technology. We show that in such a context, it is not necessarily the case that scarcity-driven higher traditional energy prices over time will induce alternative energy supply as resources are exhausted. Rather, we show that as we increase the learning potential in the substitute technology, lower equilibrium energy prices prevail and there may be increased resource extraction and greenhouse gas emissions. We show that the effectiveness and the incidence of emissions reduction policies may be altered by increased potential for technological change. Our results suggest that treating finite resource rents as endogenous consequences of both technological progress and policy changes will be important for the accurate assessment of climate change policy.

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Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2010-12.

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Length: 43 pages
Date of creation: 01 Apr 2010
Date of revision:
Handle: RePEc:ris:albaec:2010_012

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Keywords: resource extraction; climate change; induced innovation; learning-by-doing;

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References

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  1. 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. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2012. "Optimal Timing of Carbon Capture Policies Under Alternative CCS Cost Functions," IDEI Working Papers 727, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Hoel, Michael & Jensen, Svenn, 2012. "Cutting costs of catching carbon—Intertemporal effects under imperfect climate policy," Resource and Energy Economics, Elsevier, vol. 34(4), pages 680-695.
  3. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2012. "Optimal timing of CCS policies with heterogeneous energy consumption sectors," LERNA Working Papers 12.13.370, LERNA, University of Toulouse.
  4. Eiji Sawada & Shunsuke Managi, 2013. "Non-renewable Resource Extraction with Extraction and Exploration Technologies," Keio/Kyoto Joint Global COE Discussion Paper Series 2012-048, Keio/Kyoto Joint Global COE Program.
  5. Amigues, Jean-Pierre & Chakravorty, Ujjayant & Lafforgue, Gilles & Moreaux, Michel, 2012. "Renewable Portfolio Standards and implicit tax-subsidy schemes: Structural differences induced by quantity and proportional mandates," LERNA Working Papers 12.02.359, LERNA, University of Toulouse.
  6. Fischer, Carolyn & Salant, Stephen, 2012. "Alternative Climate Policies and Intertemporal Emissions Leakage: Quantifying the Green Paradox," Discussion Papers dp-12-16, Resources For the Future.
  7. Partha Sen, 2013. "Unilateral Emission Cuts And Carbon Leakages In A North-South Trade Model," Working papers 232, Centre for Development Economics, Delhi School of Economics.
  8. Greaker, Mads & Midttømme, Kristoffer, 2013. "Optimal Environmental Policy with Network Effects: Is Lock-in in Dirty Technologies Possible?," Memorandum 15/2013, Oslo University, Department of Economics.
  9. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2011. "Optimal CCS and air capture from heterogeneous energy consuming sectors," LERNA Working Papers 11.16.350, LERNA, University of Toulouse.
  10. Kristine Grimsrud & Knut Einar Rosendahl & Halvor Briseid Storrøsten & Marina Tsygankova, 2014. "Short Run Effects of Bleaker Prospects for Oligopolistic Producers of a Non-Renewable Resource," CESifo Working Paper Series 4579, CESifo Group Munich.
  11. Mads Greaker & Kristoffer Midttømme, 2014. "Optimal Environmental Policy with Network Effects: Will Pigovian Taxation Lead to Excess Inertia?," CESifo Working Paper Series 4759, CESifo Group Munich.

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