The Green Paradox and Learning by Doing

10 Pages Posted: 14 Dec 2018

See all articles by Rognvaldur Hannesson

Rognvaldur Hannesson

Norwegian School of Economics (NHH); Norwegian School of Economics (NHH) - Department of Economics

Date Written: December 13, 2018

Abstract

Production of a renewable substitute to fossil fuels is modeled as causing the cost of this backstop technology to fall over time in proportion to the scale of the substitute production and how long it has been in use. The unit cost of resource extraction is assumed to rise as the stock is depleted, so learning by doing will increase the reserves permanently left in the ground. The green paradox can nevertheless be present, in the sense that the resource extraction path can initially lie above what it would be in the absence of a parallel production of renewable energy. In a monopolistic market, the resource monopolist’s optimal price path is two-phased, even with inelastic demand. In the limit-pricing phase, the price is falling, due to the progressive learning by doing effect, and the extraction path is rising.

Keywords: Green Paradox, carbon dioxide emission, fossil fuels

JEL Classification: Q00, Q31, Q54

Suggested Citation

Hannesson, Rognvaldur, The Green Paradox and Learning by Doing (December 13, 2018). NHH Dept. of Business and Management Science Discussion Paper No. 2018/17, Available at SSRN: https://ssrn.com/abstract=3301315 or http://dx.doi.org/10.2139/ssrn.3301315

Rognvaldur Hannesson (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway
+47 55 959 260 (Phone)

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
8
Abstract Views
196
PlumX Metrics