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The green paradox of the economics of exhaustible resources

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  • Cairns, Robert D.

Abstract

The green paradox states that an increasing tax on emissions of carbon dioxide, consonant with the expected increase in their marginal damages, may induce oil producers to shift their production toward the present and thereby to exacerbate the problem of climatic change. The model is based on Hotelling models of resource use that do not take the natural and technical features of oil production into account. Natural features include the decline of production through time according to a decline curve. Technical features include the requirement to sink investment in productive capacity. A model of a profit-maximizing firm indicates that, if these features are taken into account, the prediction of the green paradox is unlikely.

Suggested Citation

  • Cairns, Robert D., 2014. "The green paradox of the economics of exhaustible resources," Energy Policy, Elsevier, vol. 65(C), pages 78-85.
  • Handle: RePEc:eee:enepol:v:65:y:2014:i:c:p:78-85
    DOI: 10.1016/j.enpol.2013.10.047
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    References listed on IDEAS

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    Cited by:

    1. Jia-Yue Huang & Yun-Fei Cao & Hui-Ling Zhou & Hong Cao & Bao-Jun Tang & Nan Wang, 2018. "Optimal Investment Timing and Scale Choice of Overseas Oil Projects: A Real Option Approach," Energies, MDPI, Open Access Journal, vol. 11(11), pages 1-22, October.
    2. Okullo, Samuel & Reynes, F. & Hofkes, M., 2016. "Biofuel Mandating and the Green Paradox," Other publications TiSEM 2ef0304e-8645-42f7-9146-7, Tilburg University, School of Economics and Management.
    3. Okullo, Samuel & Reynes, F. & Hofkes, M., 2016. "Biofuel Mandating and the Green Paradox," Discussion Paper 2016-024, Tilburg University, Center for Economic Research.
    4. Soren T. Anderson & Ryan Kellogg & Stephen W. Salant, 2018. "Hotelling under Pressure," Journal of Political Economy, University of Chicago Press, vol. 126(3), pages 984-1026.
    5. Zhao, Jun & Jiang, Qingzhe & Dong, Xiucheng & Dong, Kangyin, 2020. "Would environmental regulation improve the greenhouse gas benefits of natural gas use? A Chinese case study," Energy Economics, Elsevier, vol. 87(C).
    6. Wu, Haitao & Xu, Lina & Ren, Siyu & Hao, Yu & Yan, Guoyao, 2020. "How do energy consumption and environmental regulation affect carbon emissions in China? New evidence from a dynamic threshold panel model," Resources Policy, Elsevier, vol. 67(C).
    7. van den Bijgaart, Inge & Rodriguez, Mauricio, 2020. "Closing wells; fossil exploration and abandonment in the energy transition," Working Papers in Economics 789, University of Gothenburg, Department of Economics.
    8. Calvin Atewamba & Bruno Nkuiya, 2017. "Testing the Assumptions and Predictions of the Hotelling Model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(1), pages 169-203, January.
    9. Lappi, Pauli, 2020. "A model of optimal extraction and site reclamation," Resource and Energy Economics, Elsevier, vol. 59(C).
    10. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    11. Okullo, Samuel J. & Reynès, Frédéric, 2016. "Imperfect cartelization in OPEC," Energy Economics, Elsevier, vol. 60(C), pages 333-344.
    12. Richard G. Newell & Brian C. Prest & Ashley Vissing, 2016. "Trophy Hunting vs. Manufacturing Energy: The Price-Responsiveness of Shale Gas," NBER Working Papers 22532, National Bureau of Economic Research, Inc.
    13. Marie-Catherine Riekhof & Johannes Bröcker, 2017. "Does The Adverse Announcement Effect Of Climate Policy Matter? — A Dynamic General Equilibrium Analysis," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 8(02), pages 1-34, May.

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