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

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  • Michael Hoel

    (University of Oslo)

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

  • Michael Hoel, 2009. "Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions," Working Papers 2009.1, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2009.1
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    References listed on IDEAS

    as
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    Cited by:

    1. Frederick van der Ploeg & Cees Withagen, 2010. "Growth and the Optimal Carbon Tax: When to switch from exhaustible resources to renewables?," OxCarre Working Papers 055, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    2. 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.
    3. Benchekroun, Hassan & Withagen, Cees, 2012. "On price taking behavior in a nonrenewable resource cartel–fringe game," Games and Economic Behavior, Elsevier, vol. 76(2), pages 355-374.
    4. Michael Hoel, 2010. "Climate Change and Carbon Tax Expectations," CESifo Working Paper Series 2966, CESifo Group Munich.
    5. repec:ces:ifobei:77 is not listed on IDEAS
    6. Reyer Gerlagh, 2011. "Too Much Oil," CESifo Economic Studies, CESifo, vol. 57(1), pages 79-102, March.
    7. Quentin Grafton, R. & Kompas, Tom & Van Long, Ngo, 2012. "Substitution between biofuels and fossil fuels: Is there a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 328-341.
    8. Hart, Rob & Spiro, Daniel, 2011. "The elephant in Hotelling's room," Energy Policy, Elsevier, vol. 39(12), pages 7834-7838.
    9. Groth, Christian & Ricci, Francesco, 2011. "Optimal growth when environmental quality is a research asset," Research in Economics, Elsevier, vol. 65(4), pages 340-352, December.
    10. van der Ploeg, Frederick & Withagen, Cees, 2012. "Is there really a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 342-363.
    11. Frederick Van der Ploeg & Cees A. Withagen, 2011. "Too Little Oil, Too Much Coal: Optimal Carbon Tax and when to Phase in Oil, Coal and Renewables," CESifo Working Paper Series 3526, CESifo Group Munich.
    12. Christian Beermann, 2015. "Climate Policy and the Intertemporal Supply of Fossil Resources," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 62, January.
    13. Pittel, Karen & Röpke, Luise, 2014. "The Implications of Energy Input Flexibility for a Resource Dependent Economy," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100321, Verein für Socialpolitik / German Economic Association.
    14. Benchekroun, Hassan & Withagen, Cees, 2012. "On price taking behavior in a nonrenewable resource cartel–fringe game," Games and Economic Behavior, Elsevier, vol. 76(2), pages 355-374.
    15. Ngo Long, 2011. "Dynamic Games in the Economics of Natural Resources: A Survey," Dynamic Games and Applications, Springer, vol. 1(1), pages 115-148, March.
    16. Geoffrey Heal, 2009. "The Economics of Renewable Energy," NBER Working Papers 15081, National Bureau of Economic Research, Inc.
    17. R. Quentin Grafton & Tom Kompas & Ngo Van Long, 2010. "Biofuels Subsidies and the Green Paradox," CESifo Working Paper Series 2960, CESifo Group Munich.

    More about this item

    Keywords

    Climate Change; Exhaustible Resources; Renewable Energy;

    JEL classification:

    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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