Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions

Michael Hotel ()
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Michael Hotel: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

No 29/2008, Memorandum from Oslo University, Department of Economics

Abstract: Fossil fuels are non-renewable carbon resources, and the extraction path of these resources depends both on present and future demand. When this “Hotelling feature”is taken into consideration, the whole price path of carbon fuel will shift downwards as a response to the reduced cost of the renewable substitute. An implication of this is that greenhouse gas emissions in the near future may increase as a response to the reduced cost of the renewable substitute. If this is the case, increased climate costs may outweigh the bene…ts of reduced costs of a substitute, thus reducing overall social welfare.

Keywords: Climate change; exhaustible resources; renewable energy (search for similar items in EconPapers)
JEL-codes: Q30 Q42 Q54 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2008-12-02
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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