[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/fem/femwpa/2010.14.html
   My bibliography  Save this paper

Too Much Oil

Author

Listed:
  • Reyer Gerlagh

    (Tilburg University)

Abstract
Fear for oil exhaustion and its consequences on economic growth has been a driver of a rich literature on exhaustible resources from the 1970s onwards. But our view on oil has remarkably changed and we now worry how we should constrain climate change damages associated with oil and other fossil fuel use. In this climate change debate, economists have pointed to a green paradox: when policy makers stimulate the development of non-carbon energy sources to (partly) replace fossil fuels in the future, oil markets may anticipate a future reduction in demand and increase current supply. The availability of ‘green’ technologies may increase damages. The insight comes from the basic exhaustible resource model. We reproduce the green paradox and to facilitate discussion differentiate between a weak and a strong version, related to short-term and long-term effects, respectively. Then we analyze the green paradox in 2 standard modifications of the exhaustible resource model. We find that increasing fossil fuel extraction costs counteracts the strong green paradox, while with imperfect energy substitutes both the weak and strong green paradox may vanish.

Suggested Citation

  • Reyer Gerlagh, 2010. "Too Much Oil," Working Papers 2010.14, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2010.14
    as

    Download full text from publisher

    File URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2010-014.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Di Maria, C. & van der Werf, E.H., 2005. "Carbon Leakage Revisited : Unilateral Climate Policy with Directed Technical Change," Discussion Paper 2005-68, Tilburg University, Center for Economic Research.
    2. Copeland, Brian R. & Taylor, M. Scott, 2005. "Free trade and global warming: a trade theory view of the Kyoto protocol," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 205-234, March.
    3. Corrado Di Maria & Sjak Smulders & Edwin van der Werf, 2008. "Absolute Abundance and Relative Scarcity: Announced Policy, Resource Extraction, and Carbon Emissions," Working Papers 2008.92, Fondazione Eni Enrico Mattei.
    4. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
    5. Thomas Eichner & Rüdiger Pethig, 2011. "Carbon Leakage, The Green Paradox, And Perfect Future Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 767-805, August.
    6. Daniel J.A. Johansson & Christian Azar & Kristian Lindgren & Tobias A. Persson, 2009. "OPEC Strategies and Oil Rent in a Climate Conscious World," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 23-50.
    7. Persson, Tobias A. & Azar, C. & Johansson, D. & Lindgren, K., 2007. "Major oil exporters may profit rather than lose, in a carbon-constrained world," Energy Policy, Elsevier, vol. 35(12), pages 6346-6353, December.
    8. Myles R. Allen & David J. Frame & Chris Huntingford & Chris D. Jones & Jason A. Lowe & Malte Meinshausen & Nicolai Meinshausen, 2009. "Warming caused by cumulative carbon emissions towards the trillionth tonne," Nature, Nature, vol. 458(7242), pages 1163-1166, April.
    9. Corrado Maria & Edwin Werf, 2008. "Carbon leakage revisited: unilateral climate policy with directed technical change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(2), pages 55-74, February.
    10. Sinclair, Peter J N, 1992. "High Does Nothing and Rising Is Worse: Carbon Taxes Should Keep Declining to Cut Harmful Emissions," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(1), pages 41-52, March.
    11. Hoel, Michael & Kverndokk, Snorre, 1996. "Depletion of fossil fuels and the impacts of global warming," Resource and Energy Economics, Elsevier, vol. 18(2), pages 115-136, June.
    12. Reyer Gerlagh & Onno Kuik, 2007. "Carbon Leakage with International Technology Spillovers," Working Papers 2007.33, Fondazione Eni Enrico Mattei.
    13. Michael Hoel, 2008. "Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions," CESifo Working Paper Series 2492, CESifo.
    14. Jon Strand, 2007. "Technology Treaties and Fossil-Fuels Extraction," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 129-142.
    15. Ulph, Alistair & Ulph, David, 1994. "The Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 857-868, Supplemen.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Quentin Grafton, R. & Kompas, Tom & Van Long, Ngo, 2012. "Substitution between biofuels and fossil fuels: Is there a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 328-341.
    2. van der Werf, Edwin & Di Maria, Corrado, 2012. "Imperfect Environmental Policy and Polluting Emissions: The Green Paradox and Beyond," International Review of Environmental and Resource Economics, now publishers, vol. 6(2), pages 153-194, March.
    3. Eichner, Thomas & Pethig, Ru¨diger, 2013. "Flattening the carbon extraction path in unilateral cost-effective action," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 185-201.
    4. Ngo Van Long, 2014. "The Green Paradox in Open Economies," CESifo Working Paper Series 4639, CESifo.
    5. Christian Beermann, 2015. "Climate Policy and the Intertemporal Supply of Fossil Resources," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 62.
    6. Smulders, Sjak & Tsur, Yacov & Zemel, Amos, 2012. "Announcing climate policy: Can a green paradox arise without scarcity?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 364-376.
    7. Ngo Van LONG, 2014. "The Green Paradox under Imperfect Substitutability between Clean and Dirty Fuels," Cahiers de recherche 02-2014, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    8. Hoel, Michael & Jensen, Svenn, 2012. "Cutting costs of catching carbon—Intertemporal effects under imperfect climate policy," Resource and Energy Economics, Elsevier, vol. 34(4), pages 680-695.
    9. Hendrik Ritter & Mark Schopf, 2014. "Unilateral Climate Policy: Harmful or Even Disastrous?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 155-178, May.
    10. Michielsen, Thomas O., 2014. "Brown backstops versus the green paradox," Journal of Environmental Economics and Management, Elsevier, vol. 68(1), pages 87-110.
    11. Michael Hoel, 2011. "The Supply Side of CO 2 with Country Heterogeneity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(4), pages 846-865, December.
    12. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    13. Luise Röpke, 2015. "Essays on the Integration of New Energy Sources into Existing Energy Systems," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 58.
    14. Hoel, Michael, 2013. "Supply Side Climate Policy and the Green Paradox," Memorandum 03/2013, Oslo University, Department of Economics.
    15. Thomas Michielsen, 2013. "Brown Backstops Versus the Green Paradox," OxCarre Working Papers 108, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    16. Michielsen, T.O., 2011. "Brown Backstops versus the Green Paradox (Revision of CentER DP 2011-076)," Discussion Paper 2011-110, Tilburg University, Center for Economic Research.
    17. Michielsen, T.O., 2011. "Brown Backstops versus the Green Paradox (Revision of CentER DP 2011-076)," Other publications TiSEM 7dc5a955-80bb-4069-bdbf-d, Tilburg University, School of Economics and Management.
    18. Michael Hoel, 2010. "Climate Change and Carbon Tax Expectations," CESifo Working Paper Series 2966, CESifo.
    19. Thomas Eichner & Rüdiger Pethig, 2011. "Unilateral reduction of medium-term carbon emissions via taxing emissions and consumption," Volkswirtschaftliche Diskussionsbeiträge 152-11, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    20. Frederick van der Ploeg, 2013. "Cumulative Carbon Emissions and the Green Paradox," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 281-300, June.

    More about this item

    Keywords

    Green Paradox; Climate Change; Exhaustible Resources; Fossil Fuels;
    All these keywords.

    JEL classification:

    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    NEP fields

    This paper has been announced in the following NEP Reports:

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Economic Logic blog

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2010.14. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alberto Prina Cerai (email available below). General contact details of provider: https://edirc.repec.org/data/feemmit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.