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Cycles in nonrenewable resource prices with pollution and learning-by-doing

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  • Chakravorty, Ujjayant
  • Leach, Andrew
  • Moreaux, Michel

Abstract

We study how environmental regulation in the form of a cap on aggregate emissions from a fossil fuel (e.g., coal) interacts with the arrival of a clean substitute (e.g., solar energy). The cost of the substitute is assumed to decrease with cumulative use because of learning-by-doing. We show that optimal energy prices may initially increase because of pollution regulation, but fall due to learning, and rise again because of scarcity of the resource, finally falling after transition to the clean substitute. Thus nonrenewable resource prices may exhibit cyclical behavior even in a purely deterministic setting.

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  • Chakravorty, Ujjayant & Leach, Andrew & Moreaux, Michel, 2012. "Cycles in nonrenewable resource prices with pollution and learning-by-doing," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1448-1461.
    • Handle: RePEc:eee:dyncon:v:36:y:2012:i:10:p:1448-1461
    DOI: 10.1016/j.jedc.2012.04.005
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    Cited by:

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    2. Kollenbach, Gilbert, 2017. "Unilateral climate Policy and the Green Paradox: Extraction Costs matter," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168245, Verein für Socialpolitik / German Economic Association.
    3. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2016. "Optimal timing of carbon capture policies under learning-by-doing," Journal of Environmental Economics and Management, Elsevier, vol. 78(C), pages 20-37.
    4. James Roumasset & Christopher A. Wada, 2014. "Energy, Backstop Endogeneity, and the Optimal Use of Groundwater," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1363-1371.
    5. Nachtigall, Daniel & Rübbelke, Dirk, 2016. "The green paradox and learning-by-doing in the renewable energy sector," Resource and Energy Economics, Elsevier, vol. 43(C), pages 74-92.
    6. Yacoub Bahini & Cuong Le Van, 2015. "On the transition from nonrenewable energy to renewable energy," Post-Print halshs-01167042, HAL.
    7. Zheng, Wei, 2021. "Effects of China’s market-oriented economic reform, FDI inflows on electricity intensity," Energy, Elsevier, vol. 220(C).
    8. Prudence Dato, 2017. "Energy Transition Under Irreversibility: A Two-Sector Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(3), pages 797-820, November.
    9. Wei-Bin Zhang, 2015. "Oscillations in a Growth Model with Capital, Technology and Environment with Exogenous Shocks," Academicus International Scientific Journal, Entrepreneurship Training Center Albania, issue 12, pages 73-93, July.
    10. Michael Hoel, 2013. "Supply Side Climate Policy and the Green Paradox," CESifo Working Paper Series 4094, CESifo.
    11. Jaakkola, Niko, 2019. "Carbon taxation, OPEC and the end of oil," Journal of Environmental Economics and Management, Elsevier, vol. 94(C), pages 101-117.
    12. E. Agliardi & L. Sereno, 2012. "On the optimal timing of switching from non-renewable to renewable resources: dirty vs clean energy sources and the relative efficiency of generators," Working Papers wp855, Dipartimento Scienze Economiche, Universita' di Bologna.
    13. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2014. "Triggering the Technological Revolution in Carbon Capture and Sequestration Costs," TSE Working Papers 14-479, Toulouse School of Economics (TSE).
    14. Gilbert Kollenbach, 2015. "Endogenous Growth with a Ceiling on the Stock of Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(3), pages 615-635, November.
    15. Guo, Jian-Xin & Huang, Chen, 2020. "Feasible roadmap for CCS retrofit of coal-based power plants to reduce Chinese carbon emissions by 2050," Applied Energy, Elsevier, vol. 259(C).
    16. Xiaohong Liu & Yuekuan Zhou & Chun-Qing Li & Yaolin Lin & Wei Yang & Guoqiang Zhang, 2019. "Optimization of a New Phase Change Material Integrated Photovoltaic/Thermal Panel with The Active Cooling Technique Using Taguchi Method," Energies, MDPI, vol. 12(6), pages 1-22, March.
    17. Thomas Eichner & Gilbert Kollenbach & Mark Schopf, 2023. "Demand- Versus Supply-Side Climate Policies with a Carbon Dioxide Ceiling," The Economic Journal, Royal Economic Society, vol. 133(652), pages 1371-1406.
    18. Gilbert Kollenbach, 2019. "Unilateral climate policy and the green paradox: Extraction costs matter," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(3), pages 1036-1083, August.
    19. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2014. "Optimal Timing of CCS Policies under Decreasing Returns to Scale," TSE Working Papers 14-529, Toulouse School of Economics (TSE).
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    21. Kollenbach, Gilbert, 2015. "Abatement, R&D and growth with a pollution ceiling," Journal of Economic Dynamics and Control, Elsevier, vol. 54(C), pages 1-16.

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