Will We Ever Stop Using Fossil Fuels?

26 Pages Posted: 22 Jan 2016

See all articles by Thomas R. Covert

Thomas R. Covert

University of Chicago - Booth School of Business - Economics

Michael Greenstone

University of Chicago - Department of Economics; Becker Friedman Institute for Economics; National Bureau of Economic Research (NBER)

Christopher R. Knittel

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Date Written: January 22, 2016

Abstract

Scientists believe significant climate change is unavoidable without a drastic reduction in the emissions of greenhouse gases from the combustion of fossil fuels. However, few countries have implemented comprehensive policies that price this externality or devote serious resources to developing low carbon energy sources. In many respects, the world is betting that we will greatly reduce the use of fossil fuels because we will run out of inexpensive fossil fuels (i.e., decreases in supply) and/or technological advances will lead to the discovery of less expensive low carbon technologies (i.e., decreases in demand). The historical record indicates that the supply of fossil fuels has consistently increased over time and that their relative price advantage over low carbon energy sources has not declined substantially over time. Without robust efforts to correct the market failures around greenhouse gases, relying on supply and/or demand forces to limit greenhouse gas emissions is relying heavily on hope.

Keywords: fossil fuels; alternative energy; renewables; climate change; fracking; technological change

JEL Classification: Q31, Q35, Q41, Q42, Q54

Suggested Citation

Covert, Thomas R. and Greenstone, Michael and Knittel, Christopher R., Will We Ever Stop Using Fossil Fuels? (January 22, 2016). Becker Friedman Institute for Research in Economics Working Paper No. 2720633. Available at SSRN: https://ssrn.com/abstract=2720633 or http://dx.doi.org/10.2139/ssrn.2720633

Thomas R. Covert

University of Chicago - Booth School of Business - Economics ( email )

Graduate School of Business
1101 East 58th Street
Chicago, IL 60637
United States

Michael Greenstone (Contact Author)

University of Chicago - Department of Economics

1126 East 59th Street
Chicago, IL 60637
United States

Becker Friedman Institute for Economics ( email )

Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Christopher R. Knittel

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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