Absolute Abundance and Relative Scarcity: Announced Policy, Resource Extraction, and Carbon Emissions

Corrado Di Maria, Sjak Smulders () and Edwin van der Werf ()

No 2008.92, Working Papers from Fondazione Eni Enrico Mattei

Abstract: We study the effectiveness of climate change policy in a model with multiple non-renewable resources that differ in their carbon content. We find that, when allowing some time between announcement and implementation of a cap on carbon dioxide emissions, emissions from non-renewable energy sources increase at the time of announcement. There are two channels behind this effect. First, since a binding constraint on emissions restricts energy use during some period of time, more must be extracted during other periods. Second, since low carbon energy sources are relatively more valuable when the policy is implemented, it is optimal to conserve them ahead of enforcement. This might induce a switch to high-carbon resources before the policy is implemented.

Keywords: Climate Policy; Non-renewable Resources; Announcement Effects; Scarcity; Order of Extraction (search for similar items in EconPapers)
JEL-codes: Q31 Q41 Q54 Q58 (search for similar items in EconPapers)
Date: 2008-11
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Working Paper: Absolute Abundance and Relative Scarcity: Announced Policy, Resource Extraction, and Carbon Emissions (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2008.92

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