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

  • Hoel, Michael
  • Jensen, Svenn

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505569

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