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Cutting costs of catching carbon—Intertemporal effects under imperfect climate policy

Michael Hoel (mihoel@econ.uio.no) and Svenn Jensen

Resource and Energy Economics, 2012, vol. 34, issue 4, 680-695

Abstract: We use a two-period model to investigate intertemporal effects of cost reductions in climate change mitigation technologies for the power sector. The effect of cost reductions for CCS depends on how carbon taxes are set. If there is no carbon tax in period 1, but an optimally set carbon tax in period 2, a CCS cost reduction may reduce early emissions. Such an innovation may therefore be more desirable than comparable cost cuts related to renewable energy. The finding rests on the incentives fossil fuel owners face. If future profitability is reduced, they speed up extraction (the ‘green paradox’), and vice versa.

Keywords: Climate change; Exhaustible resources; Carbon capture and storage; Renewable energy; Green paradox (search for similar items in EconPapers)
JEL-codes: Q30 Q42 Q54 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (26)

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Related works:
Working Paper: Cutting Costs of Catching Carbon - Intertemporal Effects under Imperfect Climate Policy (2010) Downloads
Working Paper: Cutting Costs of Catching Carbon - Intertemporal effects under imperfect climate policy (2010) Downloads
Working Paper: Cutting Costs of Catching Carbon. Intertemporal effects under imperfect climate policy (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:34:y:2012:i:4:p:680-695

DOI: 10.1016/j.reseneeco.2012.07.001

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