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Cutting Costs of Catching Carbon - Intertemporal effects under imperfect climate policy

  • Hoel, Michael

    ()

    (Dept. of Economics, University of Oslo)

  • Jensen, Svenn

    ()

    (Ragnar Frisch Centre for Economic Research)

We use a two-period model to investigate intertemporal e ects of cost reductions in climate change mitigation technologies for the power sector. With imperfect climate policies, cost reductions related to carbon capture and storage (CCS) may be more desirable than comparable cost reductions related to renewable energy. The nding rests on the incentives fossil resource owners face. With regulations of emissions only in the future, cheaper renewables speed up extraction (the `green paradox'), whereas CCS cost reductions make fossil resources more attractive for future use and lead to postponement of extraction.

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File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2010/Memo-19-2010.pdf
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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 19/2010.

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Length: 31 pages
Date of creation: 03 Nov 2010
Date of revision:
Handle: RePEc:hhs:osloec:2010_019
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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  1. Sinn, Hans-Werner, 2008. "Public policies against global warming: A supply side approach," Munich Reprints in Economics 19638, University of Munich, Department of Economics.
  2. Di Maria, Corrado & Smulders, Sjak & van der Werf, Edwin, 2012. "Absolute abundance and relative scarcity: Environmental policy with implementation lags," Ecological Economics, Elsevier, vol. 74(C), pages 104-119.
  3. Ayong Le Kama, Alain & Fodha, Mouez & Lafforgue, Gilles, 2011. "Optimal Carbon Capture and Storage Policies," LERNA Working Papers 11.13.347, LERNA, University of Toulouse.
  4. Reyer Gerlagh, 2010. "Too Much Oil," Working Papers 2010.14, Fondazione Eni Enrico Mattei.
  5. Thomas Eichner & Rüdiger Pethig, 2011. "Carbon Leakage, The Green Paradox, And Perfect Future Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 767-805, 08.
  6. Frederick van der Ploeg & Cees Withagen, 2010. "Is there really a Green Paradox?," Tinbergen Institute Discussion Papers 10-020/3, Tinbergen Institute, revised 27 Aug 2012.
  7. Rolf Golombek & Mads Greaker & Sverre A.C Kittelsen & Ole Røgeberg & Finn Roar Aune, 2009. "Carbon capture and storage technologies in the European power market," Discussion Papers 603, Statistics Norway, Research Department.
  8. Michael Hoel, 2011. "The Supply Side of CO2 with Country Heterogeneity," CESifo Working Paper Series 3393, CESifo Group Munich.
  9. Chakravorty, Ujjayant & Leach, Andrew & Moreaux, Michel, 2010. "Would Hotelling Kill the Electric Car?," IDEI Working Papers 602, Institut d'Économie Industrielle (IDEI), Toulouse.
  10. Scott Barrett, 2009. "The Coming Global Climate-Technology Revolution," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 53-75, Spring.
  11. Geoffrey Heal, 2010. "Reflections--The Economics of Renewable Energy in the United States," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(1), pages 139-154, Winter.
  12. Sjak Smulders & Edwin van der Werf, 2008. "Climate policy and the optimal extraction of high- and low-carbon fossil fuels," Canadian Journal of Economics, Canadian Economics Association, vol. 41(4), pages 1421-1444, November.
  13. Hoel, Michael & Kverndokk, Snorre, 1996. "Depletion of fossil fuels and the impacts of global warming," Resource and Energy Economics, Elsevier, vol. 18(2), pages 115-136, June.
  14. 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.
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  16. Jon Strand, 2007. "Technology Treaties and Fossil-Fuels Extraction," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 129-142.
  17. Barrett, Scott, 2005. "The theory of international environmental agreements," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 28, pages 1457-1516 Elsevier.
  18. Lohwasser, Richard & Madlener, Reinhard, 2012. "Economics of CCS for coal plants: Impact of investment costs and efficiency on market diffusion in Europe," Energy Economics, Elsevier, vol. 34(3), pages 850-863.
  19. Withagen, Cees, 1994. "Pollution and exhaustibility of fossil fuels," Resource and Energy Economics, Elsevier, vol. 16(3), pages 235-242, August.
  20. 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.
  21. Olli Tahvonen, 1997. "Fossil Fuels, Stock Externalities, and Backstop Technology," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 855-74, November.
  22. Corrado Di Maria & Sjak Smulders & Edwin van der Werf, 2008. "Absolute Abundance and Relative Scarcity: Announced Policy, Resource Extraction, and Carbon Emissions," Working Papers 2008.92, Fondazione Eni Enrico Mattei.
  23. Özge \.I\c{s}legen & Stefan Reichelstein, 2011. "Carbon Capture by Fossil Fuel Power Plants: An Economic Analysis," Management Science, INFORMS, vol. 57(1), pages 21-39, January.
  24. Long, Ngo Van & Sinn, Hans-Werner, 1985. "Surprise Price Shifts, Tax Changes and the Supply Behaviour of Resource Extracting Firms," Australian Economic Papers, Wiley Blackwell, vol. 24(45), pages 278-89, December.
  25. Ulph, Alistair & Ulph, David, 1994. "The Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 857-68, Supplemen.
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