Buy coal for preservation and act strategically on the fuel market

Rüdiger Pethig and Thomas Eichner

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: In Harstad's (2012) model, climate damage only hits one group of countries, called the coalition, and the coalition's climate policy consists of capping own fuel de- mand and supply combined with the purchase of fossil fuel deposits for preserva- tion. Harstad's Theorem 1 states that if the deposit market clears the coalition's strategic fuel-cap policy implements the first-best. The present paper reconstructs that efficiency result and argues that the deposit market equilibrium as defined in Harstad (2012) fails to be attained, unless the non-coalition countries act cooper- atively on the deposit market. Without such cooperation, the coalition's strategic action on the fuel market distorts the allocation to its own favor.

JEL-codes: Q31 Q38 Q54 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-ene and nep-env
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Working Paper: Buy coal for preservation and act strategically on the fuel market (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc16:145658

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