More gas, less coal, and less CO2? Unilateral CO2 reduction policy with more than one carbon energy source

We examine an open economy’s strategy to reduce its carbon emissions by replacing its consumption of coal—very carbon intensive—with gas—less so. Unlike the standard analysis of carbon leakage, unilateral carbon-reduction policies with more than one carbon energy source may turn counter-productive, ultimately increasing world emissions. Thus, we establish testable conditions as to whether a governmental emission-reduction commitment warrants the exploitation of gas, and whether such a strategy increases global emissions. We also characterize the extent to which this unilateral policy makes the rest of the world’s emission commitments more difficult to meet. Finally, we apply our results to the case of the US

The sustainable management of a productive natural capital

This paper examines an industry whose economic activity uses a natural capital on which its profit also relies. When such a productive natural capital has a limited capacity to recover from its exploitation, a free market tends to over-exploit it, calling for public intervention. The analysis is relevant, among other examples, to the case of naturebased tourism. I study the sustainable management of a productive natural capital: the conditions under which its exploitation generates maximum long-run social benefits; the various ways in which a regulator can implement such an exploitation; the rent that it generates for the industry; the effect of social discounting and operators' short-termism, etc. Particular attention is given to situations in which the regulator gives more importance to the industry than it does to consumers, as when consumers are foreigners or when the industry generates needed tax revenues. In those contexts, I find that the industry should make more efforts of conservation, rather than less

The supply of non-renewable resources

There exists no formal treatment of non-renewable resource (NRR) supply, systematically deriving quantity as function of price. We establish instantaneous restricted (fixed reserves) and unrestricted NRR supply functions. The supply of a NRR at any date and location not only depends on the local contemporary price of the resource but also on prices at all other dates and locations. Besides the usual law of supply, which characterizes the own-price effect, cross-price effects have their own law. They can be decomposed into a substitution effect and a stock compensation effect. We show that the substitution effect always dominates: A price increase at some point in space and time causes NRR supply to decrease at all other points. This new but orthodox supply setting extends to NRRs the partial equilibrium analysis of demand and supply policies. Thereby, it provides a generalization of many results about policy-induced changes on NRR markets. The properties of restricted and unrestricted supply functions are characterized for Hotelling (homogeneous) as well as Ricardian (non homogeneous) reserves, for a single deposit as well as for several deposits that endogenously come into production or cease to be active

The rise of NGO activism

Activist NGOs increasingly oppose industrial projects that have nevertheless been approved by public regulators. To understand this recent rise in NGO activism, we develop a theory of optimal regulation in which a regulated industry seeks to undertake a project that may be harmful to society. On the one hand, public regulation is vulnerable to the influence of the industry, and may approve the project even though it is harmful. On the other hand, an NGO may oppose the project. We characterize the circumstances under which NGO opposition occurs and the circumstances under which this opposition is socially beneficial. The theory is used to explain the role that NGOs have assumed in the last decades, and has implications for the legal status of NGO activism and the appropriate degree of transparency