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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
Contact details of provider: Phone: (+33) 5 61 12 86 23
Web page: http://www.tse-fr.eu/

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  1. Toman, Michael & Withagen, Cees, 1998. "Accumulative Pollution, "Clean Technology," and Policy Design," Discussion Papers dp-98-43, Resources For the Future.
  2. 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.
  3. Jean-Pierre Amigues & Michel Moreaux & Katheline Schubert, 2011. "Optimal Use of a Polluting Non-Renewable Resource Generating both Manageable and Catastrophic Damages," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00673317, HAL.
  4. Chakravorty, Ujjayant & Leach, Andrew & Moreaux, Michel, 2011. "Would hotelling kill the electric car?," Journal of Environmental Economics and Management, Elsevier, vol. 61(3), pages 281-296, May.
  5. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2012. "Optimal Timing of Carbon Capture Policies Under Alternative CCS Cost Functions," TSE Working Papers 12-318, Toulouse School of Economics (TSE).
  6. 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.
  7. 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.
  8. repec:inr:wpaper:25547 is not listed on IDEAS
  9. repec:hal:wpaper:halshs-00564852 is not listed on IDEAS
  10. Snorre Kverndokk, 1994. "Depletion of Fossil Fuels and the impact of Global Warming," Discussion Papers 107, Statistics Norway, Research Department.
  11. 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.
  12. Olli Tahvonen, 1997. "Fossil Fuels, Stock Externalities, and Backstop Technology," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 855-74, November.
  13. 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.
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