EconPapers    
Economics at your fingertips  
 

Buy Coal or Kick-Start Green Innovation? Energy Policies in an Open Economy

Chiara Ravetti (), Tania Theoduloz () and Giulia Valacchi ()
Additional contact information
Chiara Ravetti: Politecnico di Torino
Tania Theoduloz: Universidad Catolica de Argentina
Giulia Valacchi: Maison de la Paix

Environmental & Resource Economics, 2020, vol. 77, issue 1, No 4, 95-126

Abstract: Abstract This paper analyses two unilateral policies available to countries that want to rapidly curb carbon emissions in the global economy, but do not own any fossil fuel resources. If fossil fuel owners do not cooperate in $$\hbox {CO}_2$$ CO 2 emission reduction efforts, the only strategy to reduce their fossil fuels’ use is to exploit the interconnectedness of production given by international trade. We compare a Pigouvian approach, namely a subsidy for renewable energy prices, and a Coasian supply-side strategy, buying extractive rights over fossil fuel deposits abroad. Using a dynamic North–South trade model with endogenous innovation, we show how these policies, designed to prevent an environmental disaster, have different cost and welfare profiles. If fossil fuel deposits can be purchased at their market price, the supply-side policy achieves the highest welfare. If instead the fossil fuel owners require a full compensation for their income loss, subsidies for renewable energy inputs can result in higher welfare, but only if the resource-rich region has less advanced technologies for green energy production than the countries implementing the policy.

Keywords: Energy; Trade; Fossil fuels; Directed technical change; Supply-side policies (search for similar items in EconPapers)
JEL-codes: F18 O32 O38 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s10640-020-00455-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:kap:enreec:v:77:y:2020:i:1:d:10.1007_s10640-020-00455-8

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

DOI: 10.1007/s10640-020-00455-8

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2020-09-26
Handle: RePEc:kap:enreec:v:77:y:2020:i:1:d:10.1007_s10640-020-00455-8