Would Hotelling Kill the Electric Car?

Ujjayant Chakravorty (), Andrew Leach and Michel Moreaux

No 2010-12, Working Papers from University of Alberta, Department of Economics

Abstract: In this paper, we show that the potential for endogenous technological change in alternative energy sources may alter the behaviour of resource-owning firms. When technological progress in an alternative energy source can occur through learning-by-doing, resource owners face competing incentives to extract rents from the resource and to prevent expansion of the new technology. We show that in such a context, it is not necessarily the case that scarcity-driven higher traditional energy prices over time will induce alternative energy supply as resources are exhausted. Rather, we show that as we increase the learning potential in the substitute technology, lower equilibrium energy prices prevail and there may be increased resource extraction and greenhouse gas emissions. We show that the effectiveness and the incidence of emissions reduction policies may be altered by increased potential for technological change. Our results suggest that treating finite resource rents as endogenous consequences of both technological progress and policy changes will be important for the accurate assessment of climate change policy.

Keywords: resource extraction; climate change; induced innovation; learning-by-doing (search for similar items in EconPapers)
JEL-codes: Q30 Q42 Q54 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2010-04-01
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-reg
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Would hotelling kill the electric car? (2011)
Working Paper: Would Hotelling Kill the Electric Car? (2010)
Working Paper: Would Hotelling Kill the Electric Car? (2010)
Working Paper: Would Hotelling Kill the Electric Car? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2010_012

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