47 research outputs found
Carbon price and optimal extraction of a polluting fossil fuel with restricted carbon capture
Among technological options to mitigate greenhouse gas (GHG) emissions, Carbon Capture and Storage technology (CCS) seems particularly promising. This technology allows to keep on extracting polluting fossil fuels without drastically increasing CO2 atmospheric concentration. We examine here a two-sector model with two primary energy resources, a polluting exhaustible resource and an expensive carbon-free renewable resource, in which an environmental regulation is imposed through a cap on the atmospheric carbon stock. We assume that only the emissions from one sector can be captured. Previous literature, based on one-sector models in which all emissions are capturable, finds that CCS technology should not be used before the threshold has been reached. We find that, when technical constraints make it impossible to capture emissions from both sectors, this result does not always hold. CCS technology should be used before the ceiling is reached if non capturable emissions are large enough. In that case, we find that energy prices paths must differ between sectors reflecting the difference of social cost of the resource according to its use. Numerical exercise show that, when the ceiling is set at 450ppm CO2, the initial carbon tax should equal 52$/tCO2 and that using CCS before the ceiling is optimal.dynamic models ; global warming ; externalities ; nonrenewable resources ; carbon capture ; energy markets
Assessing the Consequences of Natural Disasters on Production Networks: A Disaggregated Approach
This article proposes a framework to investigate the consequences of natural disasters. This framework is based on the disaggregation of Input-Output tables at the business level, through the representation of the regional economy as a network of production units. This framework accounts for (i) limits in business production capacity; (ii) forward propagations through input shortages; and (iii) backward propagations through decreases in demand. Adaptive behaviors are included, with the possibility for businesses to replace failed suppliers, entailing changes in the network structure. This framework suggests that disaster costs depend on the heterogeneity of losses and on the structure of the affected economic network. The model reproduces economic collapse, suggesting that it may help understand the difference between limited-consequence disasters and disasters leading to systemic failure.Natural disasters, Economic impacts, Economic Network
Should we extract the European shale gas? The effect of climate and financial constraints
URL des Documents de travail : http://centredeconomiesorbonne.univ-paris1.fr/documents-de-travail/Documents de travail du Centre d'Economie de la Sorbonne 2015.50 - ISSN : 1955-611XIn the context of the deep contrast between the shale gas boom in the United States and the recent ban by France of shale gas exploration, this paper explores whether climate policy justifies developing more shale gas, taking into account environmental damages, both local and global, and addresses the question of a potential arbitrage between shale gas development and the transition to clean energy. We construct a Hotelling-like model where electricity may be produced by three perfectly substitutable sources: an abundant dirty resource (coal), a non-renewable less polluting resource (shale gas), and an abundant clean resource (solar). The resources differ by their carbon contents and their unit costs. Fixed costs must be paid for shale gas exploration, and before solar production begins. Climate policy takes the form of a ceiling on atmospheric carbon concentration. We show that at the optimum tightening climate policy always leads to bringing forward the transition to clean energy. We determine conditions under which the quantity of shale gas extracted should increase or decrease as the ceiling is tightened. To address the question of the arbitrage between shale gas development and the transition to clean energy, we assume that the social planner has to comply to the climate constraint without increasing energy expenditures. We show that when the price elasticity of electricity demand is low, a binding financial constraint leads to an overinvestment in shale gas and postpones the switch to the clean backstop. We calibrate the model for Europe and determine whether shale gas should be extracted, depending on the magnitude of the local damage, as well as the potential extra amount of shale gas developed because of a financial constraint, and the cost of a moratorium on extraction
Carbon price and optimal extraction of a polluting fossil fuel with restricted carbon capture
Among technological options to mitigate greenhouse gas (GHG) emissions, Carbon Capture and Storage technology (CCS) seems particularly promising. This technology allows to keep on extracting polluting fossil fuels without drastically increasing CO2 atmospheric concentration. We examine here a two-sector model with two primary energy resources, a polluting exhaustible resource and an expensive carbon-free renewable resource, in which an environmental regulation is imposed through a cap on the atmospheric carbon stock. We assume that only the emissions from one sector can be captured. Previous literature, based on one-sector models in which all emissions are capturable, finds that CCS technology should not be used before the threshold has been reached. We find that, when technical constraints make it impossible to capture emissions from both sectors, this result does not always hold. CCS technology should be used before the ceiling is reached if non capturable emissions are large enough. In that case, we find that energy prices paths must differ between sectors reflecting the difference of social cost of the resource according to its use. Numerical exercise show that, when the ceiling is set at 450ppm CO2, the initial carbon tax should equal 52 la tonne de CO2 et qu'il est optimal de commencer Ă capture le CO2 avant que ce plafond ne soit atteint
Consumption taxes and taste heterogeneity
We study optimal commodity taxes in the presence of non-linear income taxes when agents differ in skills and tastes for consumption. We show that commodity taxes are partly determined by a many-person Ramsey rule when there is taste heterogeneity within income classes. The usual role of consumption taxes in relaxing incentive constraints explains the remaining part of these taxes when there is taste heterogeneity between income classes. We quantify the importance of these two components on Canadian microdata using a new method to identify empirically the binding incentive constraints. Incentives matter but tax exemptions are mostly justified by Ramsey considerations
The Grey Paradox: How Oil Owners Can Benefit From Carbon Regulation
This paper studies how oil owners can benefit from carbon taxation. We build a Hotelling-like model with three energy resources: oil (exhaustible, polluting), coal (non exhaustible, very polluting) and solar energy (non exhaustible, non polluting). The CO2 concentration must be kept under a carbon ceiling. The optimal extraction path is decentralized by a tax on emissions, and tax revenues are not redistributed. We characterize the different extraction paths. We focus on the case where both oil and coal are extracted and oil gets exhausted. When oil is cheaper to extract than coal, if oil is sufficiently scarce, or if the extraction cost of oil is close enough to the extraction cost of coal or if its pollution content is low enough, or if the demand elasticity is low enough, the profits of oil owners will increase when the carbon regulation is tightened. When oil is more expensive to extract than coal, and both resources are used and oil exhausted, tightening the carbon regulation increases the oil profits.Cet article thĂ©orique Ă©tudie comment les pĂ©troliers peuvent bĂ©nĂ©ficier de la taxation du carbone. Nous construisons un modĂšle d'extraction Ă la Hotelling, avec trois sources d'Ă©nergie: le pĂ©trole (Ă©puisable, polluant), le charbon (non Ă©puisable, trĂšs polluant) et le solaire (non Ă©puisable, non polluant). Un plafond de CO2 est introduit sous lequel la concentration de CO2 doit ĂȘtre maintenue. L'extraction optimale des ressources Ă©nergĂ©tiques est dĂ©centralisĂ©e par une taxe sur les Ă©missions, et les recettes fiscales ne sont pas redistribuĂ©es. Nous dĂ©terminons les conditions sur les paramĂštres pour obtenir les diffĂ©rents sentiers d'extraction. Nous nous intĂ©ressons aux sentiers oĂč le pĂ©trole et le charbon sont extraits et le pĂ©trole Ă©puisĂ©. Quand le pĂ©trole est moins cher Ă extraire que le charbon, si le pĂ©trole est suffisamment rare, ou si le coĂ»t d'extraction du pĂ©trole est suffisamment proche du coĂ»t d'extraction du charbon ou si son coefficient de pollution est assez faible, ou encore si l'Ă©lasticitĂ© de la demande est assez faible, les profits des pĂ©troliers vont augmenter lorsque le plafond de CO2 est diminuĂ©. Quand le pĂ©trole est plus coĂ»teux Ă extraire que le charbon, et que ces deux ressources sont utilisĂ©es et le pĂ©trole Ă©puisĂ©, resserrer la contrainte de plafond de CO2 augmente les profits des pĂ©troliers
Many-Person Ramsey Rule and Nonlinear Income Taxation
URL des Documents de travail : http://centredeconomiesorbonne.univ-paris1.fr/documents-de-travail/Documents de travail du Centre d'Economie de la Sorbonne 2015.33 - ISSN : 1955-611XWe provide a necessary condition for optimal commodity taxes when agents differ according to labor skill and consumption tastes and when the government can also use a general nonlinear tax on labor income. The discouragement index of commodities in shown to be the sum of (1) the distributive factors over the different income classes and (2) the excess demand of mimickers. The first component arises whenever there is taste heterogeneity within income classes. The second one arises whenever there is taste heterogeneity between income classes. In an empirical application from Canadian microdata we delineate groups of households with homogeneous tastes based on nonviolation of revealed preferences. Assuming that indirect taxes are set optimally, we identify the relevant incentive constraints and provide estimates for social values of the different groups. Redistribution from indirect taxes favors households living in rural Quebec