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Supply-Side Climate Policy: On the Role of Exploration and Asymmetric Information

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  • Thomas Eichner

    (University of Hagen)

  • Rüdiger Pethig

    (University of Siegen)

Abstract

In the world economy with interdependent markets for fossil fuel deposits and extracted fossil fuel, a coalition of countries may fight climate change by purchasing fossil fuel deposits for preservation. Harstad (J Polit Econ 120:77–115, 2012) has shown that the coalition’s supply-side climate policy implements the first-best. The present paper focuses on the role exploration and asymmetric information with respect to climate damage plays for the efficiency of unilateral supply-side climate policy. Under the assumption of non-strategic exploration and truthful reporting of climate damage, the deposit policy turns out to be efficient. If exploration is used strategically or the coalition misreports its climate damage, however, the deposit policy becomes inefficient.

Suggested Citation

  • Thomas Eichner & Rüdiger Pethig, 2019. "Supply-Side Climate Policy: On the Role of Exploration and Asymmetric Information," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 397-420, September.
    • Handle: RePEc:kap:enreec:v:74:y:2019:i:1:d:10.1007_s10640-019-00323-0
    DOI: 10.1007/s10640-019-00323-0
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    References listed on IDEAS

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    Cited by:

    1. Garth Day & Creina Day, 2022. "The supply-side climate policy of decreasing fossil fuel tax profiles: can subsidized reserves induce a green paradox?," Climatic Change, Springer, vol. 173(3), pages 1-19, August.

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    More about this item

    Keywords

    Coalition; Deposit; Extraction; Exploration; Asymmetric; Information;
    All these keywords.

    JEL classification:

    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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