Effects of fossil fuel prices on the transition to a low-carbon economy

Franco Ruzzenenti Franco Ruzzenenti and Andreas A. Papandreou
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Franco Ruzzenenti Franco Ruzzenenti: University of Siena
Andreas A. Papandreou: National and Kapodistrian University of Athens

Working papers from Financialisation, Economy, Society & Sustainable Development (FESSUD) Project

Abstract: The purpose of this paper is to shed light on the role that fossil fuel prices have in bringing about a transition to a low carbon economy. This is a very broad, complex and potentially ambiguous question. It requires a good understanding of the factors that can shape long run fossil fuel price trends as well as an understanding of how energy transitions take place, and more specifically how an unprecedented policy-driven global energy transition can be orchestrated. The paper starts with the theory and historical evidence of resource and energy prices with a key message that over the very long run prices of energy services have shown a steady decline. The paper explains why a focus on oil is warranted, discusses the key determinants of oil prices and presents a brief history of recent oil price patterns. It also considers the connection of oil prices with recessions, what the future might bring for fossil fuel prices, and the potential implications of an end to cheap oil for the transition to a low-carbon economy. Finally, it looks into some facets of the interaction between fossil fuel prices and climate policy with a special focus on the role of carbon prices and how these must ultimately be part of a much broader strategy for an effective transition to a low carbon economy that is robust to alternative oil price trajectories.

Keywords: oil prices; energy prices; energy policy; climate change policy; carbon prices; green paradox; socio-economic transitions; low-carbon economy (search for similar items in EconPapers)
JEL-codes: L98 O13 Q32 Q38 Q41 Q43 Q47 Q48 Q54 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2015-01-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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