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

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We use a two-period model to investigate intertemporal effects 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 finding 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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  • Michael Hoel & Svenn Jensen, 2010. "Cutting Costs of Catching Carbon. Intertemporal effects under imperfect climate policy," Discussion Papers 639, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:639
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    Cited by:

    1. Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2015. "The Role of Carbon Capture and Sequestration Policies for Climate Change Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 55-80, January.
    2. Niko Jaakkola, 2013. "Monopolistic Sequestration of European Carbon Emissions," OxCarre Working Papers 098, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    3. 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.
    4. Rübbelke, Dirk & Vögele, Stefan, 2013. "Effects of carbon dioxide capture and storage in Germany on European electricity exchange and welfare," Energy Policy, Elsevier, vol. 59(C), pages 582-588.
    5. Grimaud, André & Rouge, Luc, 2014. "Carbon sequestration, economic policies and growth," Resource and Energy Economics, Elsevier, vol. 36(2), pages 307-331.
    6. Hendrik Ritter & Mark Schopf, 2014. "Unilateral Climate Policy: Harmful or Even Disastrous?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 155-178, May.
    7. Walsh, D.M. & O'Sullivan, K. & Lee, W.T. & Devine, M.T., 2014. "When to invest in carbon capture and storage technology: A mathematical model," Energy Economics, Elsevier, vol. 42(C), pages 219-225.
    8. Nachtigall, Daniel & Rübbelke, Dirk, 2016. "The green paradox and learning-by-doing in the renewable energy sector," Resource and Energy Economics, Elsevier, vol. 43(C), pages 74-92.
    9. van der Werf, Edwin & Di Maria, Corrado, 2012. "Imperfect Environmental Policy and Polluting Emissions: The Green Paradox and Beyond," International Review of Environmental and Resource Economics, now publishers, vol. 6(2), pages 153-194, March.
    10. Jus Darko & Meier Volker, 2015. "Announcing is Bad, Delaying is Worse: Another Pitfall in Well-intended Climate Policy," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 235(3), pages 286-297, June.
    11. repec:kap:enreec:v:68:y:2017:i:1:d:10.1007_s10640-017-0151-6 is not listed on IDEAS
    12. Edwin van der Werf & Corrado Di Maria, 2011. "Unintended Detrimental Effects of Environmental Policy: The Green Paradox and Beyond," CESifo Working Paper Series 3466, CESifo Group Munich.
    13. Kollenbach, Gilbert, 2015. "Abatement, R&D and growth with a pollution ceiling," Journal of Economic Dynamics and Control, Elsevier, vol. 54(C), pages 1-16.
    14. Durmaz, Tunç & Schroyen, Fred, 2013. "Evaluating Carbon Capture and Storage in a Climate Model with Directed Technical Change," Discussion Paper Series in Economics 14/2013, Norwegian School of Economics, Department of Economics.
    15. Marc Gronwald & Ngo Long & Luise Roepke, 2017. "Simultaneous Supplies of Dirty Energy and Capacity Constrained Clean Energy: Is There a Green Paradox?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 47-64, September.
    16. Steinkraus, Arne, 2016. "Subsidizing human capital to overcome the green paradox: A demand-side approach," Economics Department Working Paper Series 17, Technische Universität Braunschweig, Economics Department.

    More about this item

    Keywords

    climate change; exhaustible resources; carbon capture and storage; renewable energy; green paradox;

    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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