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Optimal timing of CCS policies with heterogeneous energy consumption sectors

  • Amigues, Jean-Pierre
  • Lafforgue, Gilles
  • Moreaux, Michel

Using the Chakravorty et al. (2006) ceiling model, we characterize the optimal consumption paths of three energy resources: dirty oil, which is non-renewable and carbon emitting; clean oil, which is also non-renewable but carbon-free thanks to an abatement technology, and solar energy, which is renewable and carbon-free. The resulting energy-mix can supply the energy needs of two sectors. These sectors differ in the additional abatement cost they have to pay for consuming clean rather than dirty oil (sector 1 can abate its emissions at a lower cost than sector 2). We show that it is optimal to begin by fully capturing sector 1’s emissions before the ceiling is reached. Also, there may exist optimal paths along which both capture devices have to be activated. In this case first sector’s 1 emissions are fully abated before sector 2 abates partially. Finally, we discuss the effect of heterogeneity regarding the abatement cost on the uniqueness of the sectoral energy price paths.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 734.

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Date of creation: 23 Jul 2012
Date of revision: 03 Apr 2013
Publication status: Published in Environmental and Resource Economics, vol.�57, n°3, Springer Netherlands, mars 2014, p.�345-366.
Handle: RePEc:ide:wpaper:26059
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  1. Reyer Gerlagh & Bob van der Zwaan, 2006. "Options and Instruments for a Deep Cut in CO2 Emissions: Carbon Dioxide Capture or Renewables, Taxes or Subsidies?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 25-48.
  2. 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.
  3. Renaud Coulomb & Fanny Henriet, 2010. "Carbon price and optimal extraction of a polluting fossil fuel with restricted carbon capture," PSE Working Papers halshs-00564852, HAL.
  4. Chakravorty, Ujjayant & Leach, Andrew & Moreaux, Michel, 2010. "Would Hotelling Kill the Electric Car?," TSE Working Papers 09-149, Toulouse School of Economics (TSE).
  5. Chakravorty, Ujjayant & Magné, Bertrand & Moreaux, Michel, 2005. "A Hotelling Model with a Ceiling on the Stock of Pollution," IDEI Working Papers 368, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2012. "Optimal Timing of Carbon Capture Policies Under Alternative CCS Cost Functions," IDEI Working Papers 727, Institut d'Économie Industrielle (IDEI), Toulouse.
  7. Snorre Kverndokk, 1994. "Depletion of Fossil Fuels and the impact of Global Warming," Discussion Papers 107, Statistics Norway, Research Department.
  8. Olli Tahvonen, 1997. "Fossil Fuels, Stock Externalities, and Backstop Technology," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 855-74, November.
  9. Amigues, Jean-Pierre & Moreaux, Michel & Schubert, Katheline, 2011. "Optimal use of a polluting non renewable resource generating both manageable and catastrophic damages," LERNA Working Papers 11.10.344, LERNA, University of Toulouse.
  10. Toman, Michael & Withagen, Cees, 1998. "Accumulative Pollution, "Clean Technology," and Policy Design," Discussion Papers dp-98-43, Resources For the Future.
  11. repec:hal:wpaper:halshs-00564852 is not listed on IDEAS
  12. repec:inr:wpaper:25547 is not listed on IDEAS
  13. Herzog, Howard J., 2011. "Scaling up carbon dioxide capture and storage: From megatons to gigatons," Energy Economics, Elsevier, vol. 33(4), pages 597-604, July.
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