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Rapacious Oil Exploration in face of Regime Switches: Breakthrough Renewable Energy and Dynamic Resource Wars

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  • Frederick van der Ploeg

    (University of Oxford)

Abstract

Rapacious fossil fuel extraction occurs if fossil fuel producers fear that there is a probability that their under-the-ground assets becomes worth less. They show that rapacious depletion of oil reserves occurs if there is a probability of a breakthrough renewable energy coming to the market or a probability of climate policy finally becoming seriously ambitious. These are examples of one-way regime switches leading to the so-called Green Paradox. Two-way regimes switches also lead to rapacious oil depletion. They occur if there is a chance of being removed from office in a partisan political context with perennial election cycles or if there are dynamic resource wars with the hazard of being removed from office dependent on fighting efforts. This rapacity effect is stronger in societies with bad institutions and lack of political cohesiveness.

Suggested Citation

  • Frederick van der Ploeg, 2017. "Rapacious Oil Exploration in face of Regime Switches: Breakthrough Renewable Energy and Dynamic Resource Wars," Development Working Papers 415, Centro Studi Luca d'Agliano, University of Milano.
    • Handle: RePEc:csl:devewp:415
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    More about this item

    Keywords

    regime switches; breakthrough renewable energy; Green Paradox; resource;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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