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Buy coal for preservation and act strategically on the fuel market

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Abstract

In Harstad's (2012) model, climate damage only hits one group of countries, called the coalition, and the coalition's climate policy consists of capping own fuel de- mand and supply combined with the purchase of fossil fuel deposits for preserva- tion. Harstad's Theorem 1 states that if the deposit market clears the coalition's strategic fuel-cap policy implements the first-best. The present paper reconstructs that efficiency result and argues that the deposit market equilibrium as defined in Harstad (2012) fails to be attained, unless the non-coalition countries act cooper- atively on the deposit market. Without such cooperation, the coalition's strategic action on the fuel market distorts the allocation to its own favor.
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  • Thomas Eichner & Rüdiger Pethig, 2015. "Buy coal for preservation and act strategically on the fuel market," Volkswirtschaftliche Diskussionsbeiträge 178-15, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    • Handle: RePEc:sie:siegen:178-15
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    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.
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    More about this item

    Keywords

    climate coalition; fossil fuel; deposits; extraction; fuel caps;
    All these keywords.

    JEL classification:

    • 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)
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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