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Cutting Costs of Catching Carbon
Intertemporal Effects under Imperfect Climate Policy
By Hoel, M. og S. Jensen
2010
CESifo Working paper no. 3284
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Abstract |
We use a two-period model to investigate intertemporal effects of cost reductions in climate
change mitigation technologies for the power sector. With imperfect climate policies, cost
reductions related to carbon capture and storage (CCS) may be more desirable than comparable
cost reductions related to renewable energy. The finding rests on the incentives fossil
resource owners face. With regulations of emissions only in the future, cheaper renewables
speed up extraction (the ‘green paradox’), whereas CCS cost reductions make fossil resources
more attractive for future use and lead to postponement of extraction. |
| JEL Classification:
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Q30, Q42, Q54 |
| Keywords:
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climate change, exhaustible resources, carbon capture and storage, renewable energy, green paradox |
| Project:
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3162 Petroleum industry research in economics and economic management
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