Pricing Energy Resources Under Transition to Alternative Energy

Andrey Vavilov () and Georgy Trofimov ()
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Andrey Vavilov: Institute for Financial Studies
Georgy Trofimov: Institute for Financial Studies

Chapter Chapter 4 in Natural Resource Pricing and Rents, 2021, pp 77-106 from Springer

Abstract: Abstract Resource pricing has specific features in the presence of alternative technologies providing substitutes for conventional non-renewable resources. The sources of alternative energy for fossil fuels include wind, solar and biofuel energy. In this chapter, we consider a model of gradual energy transition for an energy-supplying industry. Exhaustion of a conventional non-renewable resource in this model causes a decline of the relative price of alternative energy. The market share of this energy in the energy mix of consumers is increasing as a result of gradual substitution of renewables for conventional resources. An important property demonstrated below is the Green Paradox: a higher consumer preference for alternative energy implies a higher intensity of the conventional resource extraction in the near term.

Date: 2021
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DOI: 10.1007/978-3-030-76753-2_4

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