Absolute Abundance and Relative Scarcity: Announced Policy, Resource Extraction, and Carbon Emissions

25 Pages Posted: 8 Jan 2009

See all articles by Corrado Di Maria

Corrado Di Maria

University of East Anglia

Sjak Smulders

Tilburg University - Tilburg University School of Economics and Management; University of Calgary - Department of Economics

Edwin van derWerf

University of Oldenburg

Date Written: December 9, 2008

Abstract

We study the effectiveness of climate change policy in a model with multiple non-renewable resources that differ in their carbon content. We find that, when allowing some time between announcement and implementation of a cap on carbon dioxide emissions, emissions from non-renewable energy sources increase at the time of announcement. There are two channels behind this effect. First, since a binding constraint on emissions restricts energy use during some period of time, more must be extracted during other periods. Second, since low carbon energy sources are relatively more valuable when the policy is implemented, it is optimal to conserve them ahead of enforcement. This might induce a switch to high-carbon resources before the policy is implemented.

Keywords: Climate Policy, Non-renewable Resources, Announcement Effects, Scarcity, Order of Extraction

JEL Classification: Q31, Q41, Q54, Q58

Suggested Citation

Di Maria, Corrado and Smulders, Jacobus (Sjak) A. and van derWerf, Edwin, Absolute Abundance and Relative Scarcity: Announced Policy, Resource Extraction, and Carbon Emissions (December 9, 2008). FEEM Working Paper No. 92.2008. Available at SSRN: https://ssrn.com/abstract=1313696 or http://dx.doi.org/10.2139/ssrn.1313696

Corrado Di Maria (Contact Author)

University of East Anglia ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom
441603592866 (Phone)

Jacobus (Sjak) A. Smulders

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2920 (Phone)
+31 13 466 3042 (Fax)

HOME PAGE: http://www.uvt.nl/webwijs/english/show.html?anr=801585&lang=en

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

Edwin Van derWerf

University of Oldenburg

Ammerländer Heerstraße 114-118
Oldenburg, D-26111
Germany

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