 Petrodollar recycling, oil monopoly, and carbon taxesWaldemar Marz and Johannes Pfeiffer Journal of Environmental Economics and Management, 2020, vol. 100, issue C Abstract: Besides affecting oil rents, climate policy can have far-reaching capital market implications. We identify a new general equilibrium transmission channel of climate policy on oil extraction by an oil monopolist who accounts for the influence of oil supply on returns on own petrodollar-financed capital assets. Climate-policy-induced adjustments in capital asset holdings by the exporting country lead to postponement of extraction under a wide range of reasonable parameter settings: for the reference calibration present extraction drops by 1.28 percent for an ad valorem tax corresponding to 100$ per ton of carbon, while it increases by 0.52 percent for a competitive oil market. This contrasts with the literature on supply-side effects of climate policy which neglects these capital market implications. Concerns about carbon taxes arising from unintended climate-damaging supply reactions are alleviated. Keywords: Monopoly; Fossil energy resources; General equilibrium; Capital assets; Climate policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:100:y:2020:i:c:s0095069618302584 DOI: 10.1016/j.jeem.2019.102263 Access Statistics for this article Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates More articles in Journal of Environmental Economics and Management from Elsevier |
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