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The fossil episode

Listed author(s):
  • Hassler, John
  • Sinn, Hans-Werner

Agriculture sector output (biocarbon) is a good substitute for oil in energy production but oil cannot be used as food. This one-way substitutability is analyzed in a dynamic general equilibrium model. It features three endogenous phases: a pure fossil, a mixed fossil and biocarbon and an absorbing biocarbon fuel only phase. In the latter two, the demand for biocarbon as fuel leads to increasing food prices. Depending on how easily capital and labor can reallocate, food prices increase by between 40% and 240%. The model is also used to analyze climate consequences of biocarbon fuel polices and of the shale revolution.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304393216300733
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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 83 (2016)
Issue (Month): C ()
Pages: 14-26

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Handle: RePEc:eee:moneco:v:83:y:2016:i:c:p:14-26
DOI: 10.1016/j.jmoneco.2016.08.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  1. Piesse, Jenifer & Thirtle, Colin, 2009. "Three bubbles and a panic: An explanatory review of recent food commodity price events," Food Policy, Elsevier, vol. 34(2), pages 119-129, April.
  2. John Hassler & Per Krusell & Conny Olovsson, 2010. "Oil Monopoly and the Climate," American Economic Review, American Economic Association, vol. 100(2), pages 460-464, May.
  3. Christopher L. Gilbert, 2010. "How to Understand High Food Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 398-425.
  4. Hans-Werner Sinn, 2007. "Public Policies against Global Warming," NBER Working Papers 13454, National Bureau of Economic Research, Inc.
  5. Desmet, Klaus & Rossi-Hansberg, Esteban, 2015. "On the spatial economic impact of global warming," Journal of Urban Economics, Elsevier, vol. 88(C), pages 16-37.
  6. Sinn, Hans-Werner, 2012. "The Green Paradox: A Supply-Side Approach to Global Warming," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262016680, July.
  7. Partha Dasgupta & Geoffrey Heal, 1974. "The Optimal Depletion of Exhaustible Resources," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 3-28.
  8. Derek Headey & Shenggen Fan, 2008. "Anatomy of a crisis: the causes and consequences of surging food prices," Agricultural Economics, International Association of Agricultural Economists, vol. 39(s1), pages 375-391, November.
  9. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
  10. Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2014. "Optimal Taxes on Fossil Fuel in General Equilibrium," Econometrica, Econometric Society, vol. 82(1), pages 41-88, 01.
  11. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
  12. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
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