Title
A Hotelling model with a ceiling on the stock of pollution
Abbreviated Journal Title
J. Econ. Dyn. Control
Keywords
environmental agreements; externalities; fossil fuels; nonrenewable; resources; nonstationary demand; NATURAL-RESOURCE USE; FOSSIL-FUELS; POLICY; EXTERNALITIES; TECHNOLOGY; Economics
Abstract
Environmental agreements such as the Kyoto Protocol aim to stabilize the amount of carbon in the atmosphere, which is mainly caused by the burning of nonrenewable resources such as coal. We characterize the solution to the textbook Hotelling model when there is a ceiling on the stock of emissions. We consider both increasing and decreasing demand for energy. We show that when the ceiling is binding, both the low-cost nonrenewable resource and the high-cost renewable resource may be used jointly. A key implication is that if energy demand were to decline in the long run, we may supplement energy supply through 'clean' renewables to meet the environmental standard, but then revert back to using only 'dirty' fossil fuels in the future when the ceiling has become non-binding. That is, the much heralded societal transition' to clean energy resources may be short-lived. (c) 2005 Elsevier B.V. All rights reserved.
Journal Title
Journal of Economic Dynamics & Control
Volume
30
Issue/Number
12
Publication Date
1-1-2006
Document Type
Article
Language
English
First Page
2875
Last Page
2904
WOS Identifier
ISSN
0165-1889
Recommended Citation
"A Hotelling model with a ceiling on the stock of pollution" (2006). Faculty Bibliography 2000s. 6010.
https://stars.library.ucf.edu/facultybib2000/6010
Comments
Authors: contact us about adding a copy of your work at STARS@ucf.edu