EconPapers    
Economics at your fingertips  
 

Uncertain long-run emissions targets, CO2 price and global energy transition: A general equilibrium approach

Olivier Durand-Lasserve, Axel Pierru () and Yves Smeers

Energy Policy, 2010, vol. 38, issue 9, 5108-5122

Abstract: The persistent uncertainty about mid-century CO2 emissions targets is likely to affect not only the technological choices that energy-producing firms will make in the future but also their current investment decisions. We illustrate this effect on CO2 price and global energy transition within a MERGE-type general-equilibrium model framework, by considering simple stochastic CO2 policy scenarios. In these scenarios, economic agents know that credible long-run CO2 emissions targets will be set in 2020, with two possible outcomes: either a "hard cap" or a "soft cap". Each scenario is characterized by the relative probabilities of both possible caps. We derive consistent stochastic trajectories--with two branches after 2020--for prices and quantities of energy commodities and CO2 emissions permits. The impact of uncertain long-run CO2 emissions targets on prices and technological trajectories is discussed. In addition, a simple marginal approach allows us to analyze the Hotelling rule with risk premia observed for certain scenarios.

Keywords: CO2; Uncertainty; Energy; transition (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301-4215(10)00315-0
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Uncertain long-run emissions targets, CO2 price and global energy transition: a general equilibrium approach (2010) Downloads
Working Paper: Uncertain long-run emission targets, CO2 price and global energy transition: a general equilibrium approach (2010) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:38:y:2010:i:9:p:5108-5122

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-09-14
Handle: RePEc:eee:enepol:v:38:y:2010:i:9:p:5108-5122