Climate Policy and Resource Extraction with Variable Markups and Imperfect Substitute

Malik Curuk and Suphi Sen

No 278, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: We develop a resource extraction model that features imperfect substitution and endogenous market power. We analytically characterize the effect of anticipated future demand shocks on the resource extraction path and show that endogenous market power can dampen the adverse consequences of climate policies due to intertemporal carbon leakages compared to the perfect or monopolistic competition benchmarks. Next, we show that under constant elasticity of substitution between alternative energy resources, resource owner's current market share and reserves-to-extraction ratio are sufficient statistics to calculate the degree of intertemporal leakage. Applying data on OPEC, we find a minor increase in current extraction due to an anticipated increase in the productivity of alternative energy technologies.

JEL-codes: H23 L10 Q35 Q48 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-com, nep-ene and nep-env
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Climate Policy and Resource Extraction with Variable Markups and Imperfect Substitutes (2023)
Working Paper: Climate Policy and Resource Extraction with Variable Markups and Imperfect Substitutes (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ifowps:_278

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