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Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions

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  • Hoel, Michael

Abstract

Fossil fuels are non-renewable carbon resources, and the extraction path of these resources depends both on present and future demand. When this “Hotelling feature” is taken into consideration, the whole price path of carbon fuel will shift downwards as a response to the reduced cost of the renewable substitute. An implication of this is that greenhouse gas emissions in the near future may increase as a response to the reduced cost of the renewable substitute. If this is the case, increased climate costs may outweigh the benefits of reduced costs of a substitute, thus reducing overall social welfare.

Suggested Citation

  • Hoel, Michael, 2009. "Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions," Climate Change Modelling and Policy Working Papers 47175, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemcc:47175
    DOI: 10.22004/ag.econ.47175
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    References listed on IDEAS

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    Cited by:

    1. Smulders, Sjak & Tsur, Yacov & Zemel, Amos, 2012. "Announcing climate policy: Can a green paradox arise without scarcity?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 364-376.
    2. Wang, Min & Zhao, Jinhua, 2018. "Are renewable energy policies climate friendly? The role of capacity constraints and market power," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 41-60.
    3. Valentina Bosetti & Enrica De Cian, 2013. "A Good Opening: The Key to Make the Most of Unilateral Climate Action," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(2), pages 255-276, October.
    4. Wang, Min, 2010. "Essays on Environment, Natural Resource, Growth and Development," ISU General Staff Papers 201001010800002824, Iowa State University, Department of Economics.
    5. Geoffrey Heal, 2009. "The Economics of Renewable Energy," NBER Working Papers 15081, National Bureau of Economic Research, Inc.

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