Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions

30 Pages Posted: 12 Dec 2008  

Michael Hoel

University of Oslo; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: January 28, 2009

Abstract

Fossil fuels are non-renewable carbon resources, and the extraction path of these resources depends both on present and future demand. When this "Hotelling feature" is taken into consideration, the whole price path of carbon fuel will shift downwards as a response to the reduced cost of the renewable substitute. An implication of this is that greenhouse gas emissions in the near future may increase as a response to the reduced cost of the renewable substitute. If this is the case, increased climate costs may outweigh the benefits of reduced costs of a substitute, thus reducing overall social welfare.

Keywords: climate change, exhaustible resources, renewable energy

JEL Classification: Q30, Q42, Q54

Suggested Citation

Hoel, Michael, Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions (January 28, 2009). CESifo Working Paper Series No. 2492; FEEM Working Paper No. 1.2009. Available at SSRN: https://ssrn.com/abstract=1314688

Michael Hoel (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

University of Oslo ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway
+ 47 22 85 83 87 (Phone)
+ 47 22 85 50 35 (Fax)

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