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

Author

Listed:
  • Hotel, Michael

    () (Dept. of Economics, 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 bene…ts of reduced costs of a substitute, thus reducing overall social welfare.

Suggested Citation

  • Hotel, Michael, 2008. "Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions," Memorandum 29/2008, Oslo University, Department of Economics.
  • Handle: RePEc:hhs:osloec:2008_029
    as

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    File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2008/Memo-29-2008.pdf
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    References listed on IDEAS

    as
    1. Bohm Peter, 1993. "Incomplete International Cooperation to Reduce CO2 Emissions: Alternative Policies," Journal of Environmental Economics and Management, Elsevier, vol. 24(3), pages 258-271, May.
    2. Michael Hoel, 1984. "Extraction of a Resource with a Substitute for Some of Its Uses," Canadian Journal of Economics, Canadian Economics Association, vol. 17(3), pages 593-602, August.
    3. Hoel Michael, 1994. "Efficient Climate Policy in the Presence of Free Riders," Journal of Environmental Economics and Management, Elsevier, vol. 27(3), pages 259-274, November.
    4. Chakravorty, Ujjayant & Magne, Bertrand & Moreaux, Michel, 2006. "A Hotelling model with a ceiling on the stock of pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2875-2904, December.
    5. Jon Strand, 2007. "Technology Treaties and Fossil-Fuels Extraction," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 129-142.
    6. Hoel, Michael, 2011. "Environmental R&D," Memorandum 12/2010, Oslo University, Department of Economics.
    7. Hans-Werner Sinn, 2007. "Public Policies against Global Warming," NBER Working Papers 13454, National Bureau of Economic Research, Inc.
    8. Olli Tahvonen, 1995. "Dynamics of pollution control when damage is sensitive to the rate of pollution accumulation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 5(1), pages 9-27, January.
    9. Donald A. Hanson, 1980. "Increasing Extraction Costs and Resource Prices: Some Further Results," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 335-342, Spring.
    10. Ulph, Alistair & Ulph, David, 1994. "The Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 857-868, Supplemen.
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    Cited by:

    1. 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.

    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
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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