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Breakthrough renewables and the green paradox

Abstract:

We show how a fossil fuelmonopoly responds to a carbon-free substitute becoming available at some uncertain point in the future if demand is isoelastic and variable extraction costs are zero but upfront exploration investment costs have to be made. Before the breakthrough, oil reserves are depleted too rapidly; afterwards, the oil depletion rate drops and the oil price jumps up by discrete amounts. Subsidizing green R&D; to speed up the breakthrough speeds up oil extraction before the bre...

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Publication status:
Published
Peer review status:
Peer reviewed

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Publisher copy:
10.1628/001522118x15101422148687

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Institution:
University of Oxford
Division:
SSD
Department:
Economics
Sub department:
OxCarre
Oxford college:
New College
Role:
Author
Publisher:
Mohr Siebeck Publisher's website
Journal:
FinanzArchiv Journal website
Volume:
74
Issue:
1
Pages:
52-70
Publication date:
2018-03-01
Acceptance date:
2017-10-04
DOI:
ISSN:
1614-0974 and 0015-2218
Source identifiers:
844094
Language:
English
Keywords:
Pubs id:
pubs:844094
UUID:
uuid:1308ee53-b28b-4145-8f40-e21a3d4e8509
Local pid:
pubs:844094
Deposit date:
2019-05-16

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