Contracting for Impure Public Goods: Carbon Offsets and Additionality

Governments contracting with private agents for the provision of an impure public good must contend with agents who would potentially supply the good absent any payments. This additionality problem is centrally important in the use of carbon offsets as part of climate change mitigation. Analyzing optimal contracts for forest carbon sequestration, an important offset category, we conduct a national-scale simulation using results from an econometric model of land-use change. The results indicate that for an increase in forest area of 50 million acres, annual government expenditures with optimal contracts are about $4 billion lower compared than under a uniform subsidy.Carbon Sequestration, Incentive Contracting, Offsets, Additionality

Why do Firms Hold Oil Stockpiles?

Persistent and significant privately-held stockpiles of crude oil have long been an important empirical regularity in the United States. Such stockpiles would not rationally be held in a traditional Hotelling-style model. How then can the existence of these inventories be explained? In the presence of sufficiently stochastic prices, oil extracting firms have an incentive to hold inventories to smooth production over time. An alternative explanation is related to a speculative motive - firms hold stockpiles intending to cash in on periods of particularly high prices. I argue that empirical evidence supports the former but not the latter explanation.Petroleum Economics, Stochastic Dynamic Optimization

An Economic Simulation of the Path to Sustainable Energy: A Dynamic Analysis

The existing economics literature neglects the important role of capacity in the production of renewable energy. To fill this gap, we construct a model in which renewable energy production is tied to renewable energy capacity, which then becomes a form of capital. This capacity capital can be increased through investment, which we interpret as arising from the allocation of energy, and which therefore comes at the cost of reduced general production. Requiring societal well-being to never decline—the notion of sustainability favored by economists—we describe how society could optimally elect to split energy in this fashion, the use of non-renewable energy resources, the use of renewable energy resources, and the implied time path of societal well-being. Our model delivers an empirically satisfactory explanation for simultaneous use of non-renewable and renewable energy. We also discuss the optimality of ceasing use of non-renewable energy before the non-renewable resource stock is fully exhausted

An Economic Simulation of the Path to Sustainable Energy: A Dynamic Analysis

The existing economics literature neglects the important role of capacity in the production of renewable energy. To fill this gap, we construct a model in which renewable energy production is tied to renewable energy capacity, which then becomes a form of capital. This capacity capital can be increased through investment, which we interpret as arising from the allocation of energy, and which therefore comes at the cost of reduced general production. Requiring societal well-being to never decline—the notion of sustainability favored by economists—we describe how society could optimally elect to split energy in this fashion, the use of non-renewable energy resources, the use of renewable energy resources, and the implied time path of societal well-being. Our model delivers an empirically satisfactory explanation for simultaneous use of non-renewable and renewable energy. We also discuss the optimality of ceasing use of non-renewable energy before the non-renewable resource stock is fully exhausted

Concentration trends in the Gulf of Mexico oil and gas industry

In this paper, I evaluate patterns of concentration in the Gulf of Mexico oil and gas industry, one of the most important sectors for US production over the past few decades. In the 1990s, production in the Gulf was quite concentrated, and was dominated by large oil companies. But over the past decade or so this concentration has eroded, with recent levels consistent with an unconcentrated industry. These patterns apply for drilling and leasing as well, and are relevant to both shallow and deep water. The overall picture is an industry with strong competition for leases, drilling and production

The Silurian of central Kentucky, U.S.A.: Stratigraphy, palaeoenvironments and palaeoecology

Silurian rocks in Kentucky are exposed on the eastern and western flanks of the Cincinnati Arch, a large-wavelength cratonic structure separating the Appalachian foreland basin from the intracratonic Illinois Basin. The Cincinnati Arch area experienced uplift during latest Ordovician-early Silurian time, so that the exposed Silurian section is relatively thin due to onlap and post-Silurian erosional truncation on the arch. On both flanks of the arch, dolomitic carbonates predominate, but the section on the eastern side reflects a more shale-rich ramp that faced eastern Appalachian source areas. In the Silurian section on the western side of the arch, which apparently developed across a platform-like isolation-accommodation zone, shales are rare except during some highstand episodes, and rocks in the area reflect deposition across a broad, low-gradient shelf area, interrupted by structurally controlled topographic breaks. Using the progression of interpreted depositional environments and nearshore faunal communities, a relative sea-level curve, which parallels those of previous workers, was generated for the section in Kentucky. While the curve clearly shows the influence of glacial eustasy, distinct indications of the far-field, flexural influence of Taconian and Salinic tectonism are also present. In fact, at times, regional tectonic subsidence seems to have overwhelmed the effects of glacio-eustasy. Regional angular truncations in the section, as well as overlying bentonitic shales and a dysaerobic fauna in the deepest-water part of the section (Estill Shale), are best explained in terms of far-field tectonic subsidence accompanying the first tectophase of the Salinic Orogeny in the Appalachian area

Co-optimization of Enhanced Oil Recovery and Carbon Sequestration

In this paper, we present what is to our knowledge the first theoretical economic analysis of CO2- enhanced oil recovery (EOR). This technique, which has been used successfully in a number of oil plays (notably in West Texas, Wyoming, and Saskatchewan), entails injection of CO2 into mature oil fields in a manner that reduces the oil's viscosity, thereby enhancing the rate of extraction. As part of this process, significant quantities of CO2 remain sequestered in the reservoir. If CO2 emissions are regulated, oil producers using EOR should therefore be able to earn sequestration credits in addition to oil revenues. We develop a theoretical framework that analyzes the dynamic co-optimization of oil extraction and CO2 sequestration, through the producer's choice at each point in time of an optimal CO2 fraction in the injection stream (the control variable). We find that the optimal fraction is likely to decline monotonically over time, and reach zero before the optimal termination time. Numerical simulations, based on an ongoing EOR project in Wyoming, confirm this result. They show also that cumulative sequestration is positively related to the oil price, and is in fact much more responsive to oil-price increases than to increases in the carbon tax. Only at very high taxes does a tradeoff between oil output and sequestration arise.

Imminent entry and the transition to multimarket rivalry in a laboratory setting

In this paper we study the behavior of rivals when there is a known probability of imminent entry. Experimental markets are used to collect data on pre- and postentry production when there is an announced time of possible entry; some markets experience entry and other do not. In all preentry markets competition is more intense. Postentry behavior in all markets is more competitive compared to a baseline that had no threat. There is evidence that postentry multimarket contact raises outputs in those markets that did not experience entry, behavior we generally refer to as a conduit effect

The economics of Canadian oil sands

We analyze the status of Canadian oil sands and examine future prospects. Our analysis suggests sustained activity in the sector in the medium- to long-term even with challenging changes in the surrounding economic and policy circumstances (in particular low oil prices and a redoubled commitment to more aggressive climate policies by Canada’s provincial and federal governments). However, a combination of an expectation of a sustained increase in benchmark oil prices and the expected relaxation of transportation constraints will be needed to stimulate significant additional growth in production. We provide an overview of the basic production economics, as well as the economics and politics of getting product to market by pipeline and rail. A review of environmental impacts of Canadian oil sands development reveals significant concerns with respect to air quality, water quality, wildlife and other environmental impacts. However, we find that existing research on the environmental and wider social impacts is insufficient to underpin credible benefit-cost analysis of oil sands activities and development

Metastatic progression and gene expression between breast cancer cell lines from African American and Caucasian women

African American (AA) women have a lower overall incidence of breast cancer than do Caucasian (CAU) women, but a higher overall mortality. Little is known as to why the incidence of breast cancer is lower yet mortality is higher in AA women. Many studies speculate that this is only a socio-economical problem. This investigation suggests the possibility that molecular mechanisms contribute to the increased mortality of AA women with breast cancer. This study investigates the expression of 14 genes which have been shown to play a role in cancer metastasis. Cell lines derived from AA and CAU patients were analyzed to demonstrate alterations in the transcription of genes known to be involved in cancer and the metastatic process. Total RNA was isolated from cell lines and analyzed by RT-PCR analysis. Differential expression of the 14 targeted genes between a spectrum model (6 breast cancer cell lines and 2 non-cancer breast cell lines) and a metastasis model (12 metastatic breast cancer cell lines) were demonstrated. Additionally, an in vitro comparison of the expression established differences in 5 of the 14 biomarker genes between African American and Caucasian breast cell lines. Results from this study indicates that altered expression of the genes Atp1b1, CARD 10, KLF4, Spint2, and Acly may play a role in the aggressive phenotype seen in breast cancer in African American women