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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 Toulouse School of Economics (TSE) in its series TSE Working Papers with number 12-326.

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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:tse:wpaper:26060
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  1. 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.
  2. Chakravorty, Ujjayant & Leach, Andrew & Moreaux, Michel, 2010. "Would Hotelling Kill the Electric Car?," Working Papers 2010-12, University of Alberta, Department of Economics.
  3. Alain Ayong Le Kama & Mouez Fodha & LAFFORGUE Gilles, 2009. "Optimal Carbon Capture and Storage policies," LERNA Working Papers 09.24.300, LERNA, University of Toulouse.
  4. Ujjayant Chakravorty & Bertrand Magne & Michel Moreaux, 2003. "A Hotelling Model with a Ceiling on the Stock of Pollution," Emory Economics 0321, Department of Economics, Emory University (Atlanta).
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. Toman, Michael & Withagen, Cees, 1998. "Accumulative Pollution, "Clean Technology," and Policy Design," Discussion Papers dp-98-43, Resources For the Future.
  10. repec:hal:wpaper:halshs-00564852 is not listed on IDEAS
  11. repec:inr:wpaper:25547 is not listed on IDEAS
  12. Jean-Pierre AMIGUES & Michel MOREAUX & Katheline SCHUBERT, 2011. "Optimal Use of a Polluting non Renewable Ressource Generating Both Manageable and Catastrophic Damages," Annals of Economics and Statistics, GENES, issue 103-104, pages 107-142.
  13. Olli Tahvonen, 1997. "Fossil Fuels, Stock Externalities, and Backstop Technology," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 855-74, November.
  14. 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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