nep-res New Economics Papers
on Resource Economics
Issue of 2014‒02‒21
seven papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Untapped Fossil Fuel and the Green Paradox By Frederick van der Ploeg
  2. Abandoning Fossil Fuel; How fast and how much? By Armon Rezai; Frederick van der Ploeg
  3. Decentralized Regulation, Environmental Efficiency and Productivity By Ghosal, Vivek; Stephan , Andreas; Weiss, Jan
  4. Abrupt Positive Feedback and the Social Cost of Carbon By Frederick van der Ploeg
  5. Environmental Technology Transfer in a Cournot Duopoly: The Case of Fixed-Fee Licensing By Akira Miyaoka
  6. Diffusion of NOx abatement technologies in Sweden By Bonilla, Jorge; Coria, Jessica; Mohlin, Kristina; Sterner, Thomas
  7. Guidelines for Exploiting Natural Resource Wealth By Frederick van der Ploeg

  1. By: Frederick van der Ploeg
    Abstract: A classroom model of global warming, fossil fuel depletion and the optimal carbon tax is formulated and calibrated. It features iso-elastic fossil fuel demand, stock-dependent fossil fuel extraction costs, an exogenous interest rate and no decay of the atmospheric stock of carbon. The optimal carbon tax reduces emissions from burning fossil fuel, both in the short and medium run. Furthermore, it brings forward the date that renewables take over from fossil fuel and encourages the market to keep more fossil fuel locked up. A renewables subsidy induces faster fossil fuel extraction and thus accelerates global warming during the fossil fuel phase, but brings forward the carbon-free era, locks up more fossil fuel reserves and thus ultimately curbs cumulative carbon emissions and global warming. For relatively large subsidies social welfare is more likely to fall as the economic costs rises more than proportionally with the size of the subsidy. Our calibration suggests that such subsidies are not a good second-best climate policy.
    Keywords: global warming, social cost of carbon, optimal carbon tax, renewables
    JEL: D81 H20 Q31 Q38
    Date: 2014
  2. By: Armon Rezai; Frederick van der Ploeg
    Abstract: Climate change must deal with two market failures, global warming and learning by doing in renewable use. The social optimum requires an aggressive renewables subsidy in the near term and a gradually rising carbon tax which falls in long run. As a result, more renewables are used relative to fossil fuel, there is an intermediate phase of simultaneous use, the carbonfree era is brought forward, more fossil fuel is locked up and global warming is lower. The optimal carbon tax is not a fixed proportion of world GDP. The climate externality is more severe than the learning by doing one.
    Keywords: climate change, integrated assessment, Ramsey growth, carbon tax, renewables subsidy, learning by doing, directed technical change, multiplicative damages, additive damages
    JEL: H21 Q51 Q54
    Date: 2014
  3. By: Ghosal, Vivek (Georgia Institute of Technology (Atlanta), European Business School (Wiesbaden), and CESifo (Munich).); Stephan , Andreas (CESIS Stockholm and Jönköping International Business School); Weiss, Jan (Jönköping International Business School)
    Abstract: Using a unique plant-level dataset we examine green productivity growth in Sweden’s heavily regulated pulp and paper industry, which has historically been a significant contributor to air and water pollution. Our exercise is interesting as Sweden has a unique regulatory structure where plants have to comply with national environmental regulatory standards and enforcement, along with decentralised plant-specific regulations. In our analysis, we use the sequential Malmquist-Luenberger productivity index which accounts for air and water pollutants as undesirable outputs. Some of our key findings are: (1) regulation has stimulated technical change related to pollution control, and has induced plants to catch up with the best-practice technology frontier with regard to effluent abatement; (2) large plants are more heavily regulated than small plants; (3) plants in environmentally less sensitive areas or those with local importance as employer face relatively lenient regulatory constraints; (4) environmental regulations trigger localized knowledge spillovers between nearby plants, boosting their green TFP growth.
    Keywords: TFP; DEA; Sequential Malmquist-Luenberger productivity index; pulp and paper industry; pollution; environmental regulations; enforcement; plant-specific regulation; productivity; Porter hypothesis
    JEL: D24 L51 L60 Q52 Q53 Q58
    Date: 2014–02–10
  4. By: Frederick van der Ploeg
    Abstract: Optimal climate policy should act in a precautionary fashion to deal with tipping points that occur at some future random moment. The optimal carbon tax should include an additional component on top of the conventional present discounted value of marginal global warming damages. This component increases with the sensitivity of the hazard to temperature or the stock of atmospheric carbon. If the hazard of a catastrophe is constant, no correction is needed of the usual Pigouvian tax. The results are applied to a tipping point resulting from an abrupt and irreversible release of greenhouse gases from the ocean floors and surface of the earth, which set in motion a positive feedback loop. Convex enough hazard functions cause overshooting of the carbon tax, but a linear hazard function gives rise to undershooting. A more convex hazard function and a high discount rate speed up adjustment.
    Keywords: social cost of carbon, tipping point, positive feedback, climate
    JEL: D81 H20 Q31 Q38
    Date: 2014
  5. By: Akira Miyaoka (Graduate School of Economics, Osaka University)
    Abstract: This study considers a Cournot duopoly market in which a clean firm can transfer its less polluting technology to a dirty firm through a fixed-fee licensing contract. We analyze the impacts of emissions taxes on the incentives of firms to transfer technology as well as on the total pollution level, and examine the properties of the optimal emissions tax policy. We first show that higher emissions taxes weaken incentives for technology transfer and that this can lead to a perverse increase in the level of total pollution. We then compare the optimal emissions tax when technology licensing is possible with that when licensing is infeasible and show that the relationship between the optimal tax rate and the degree of the initial technology gap between firms when licensing is possible can be the opposite of that when licensing is infeasible.
    Keywords: Technology transfer; Cournot duopoly; Pollution; Emissions tax
    JEL: L13 L24 Q58
    Date: 2014–02
  6. By: Bonilla, Jorge (Department of Economics, School of Business, Economics and Law, Göteborg University); Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Mohlin, Kristina (Department of Economics, School of Business, Economics and Law, Göteborg University); Sterner, Thomas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper studies how different NOx abatement technologies have diffused under the Swedish system of refunded emissions charges and analyzes the determinants of the time to adoption. The policy, under which the charge revenues are refunded back to the regulated firms in proportion to energy output, was explicitly designed to affect investment in NOx-reducing technologies. The results indicate that a higher net NOx charge liability, i.e. a reduction in tax liabilities net of the refund due to the new technology, increases the likelihood of adoption, but only for end-of-pipe post-combustion technologies. We also find some indication that market power considerations in the heat and power industry reduce the incentives to abate emissions through investment in postcombustion technologies. Adoption of post-combustion technologies and the efficiency improving technology of flue gas condensation are also more likely in the heat and power and waste incineration sectors, which is possibly explained by a large degree of public ownership in these sectors.
    Keywords: technology diffusion; NOx; abatement technologies; environmental regulations; refunded emission charge
    JEL: H23 O33 O38 Q52
    Date: 2014–01
  7. By: Frederick van der Ploeg
    Abstract: The principles of how best to manage the various components of national wealth are outlined, where the permanent income hypothesis, the Hotelling rule and the Hartwick rule play a prominent role. As far as managing natural resource wealth is concerned, a case is made to use an intergenerational sovereign wealth fund to smooth consumption across generations, a liquidity fund for the precautionary buffers to deal with commodity price volatility, and an investment fund to park part of the windfall until the country is ready to absorb extra spending on domestic investment. Capital scarcity implies that a positive part of the windfall should be spent on domestic investment. The conclusions highlight the political economy problems that will have to be tackled with these normative proposals for managing wealth.
    Keywords: permanent income, Hotelling rule, Hartwick rule, precaution, capital scarcity, absorption constraints, Dutch disease, investing to invest, political economy
    JEL: E21 E22 D91 Q32
    Date: 2014

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