Sustainable management of fossil fuels: A dynamic stochastic optimization approach with jump-diffusion

This paper deals with a relevant aspect of energy modeling, i.e. fossil fuels management. The issue is faced by using purely operational research techniques, which are suitable in this context. In particular, a dynamic stochastic optimization model is developed to optimally determine use and stock of resources to be employed in consumption and investments, in a wide economic sense: human and physical capital, R&D, etc. It is assumed that a sustainability criterion drives the optimality rules, i.e. decisions are also grounded on the well-being of future generations. The policymaker maximizes an aggregated intergenerational expected utility under the dilemma of present consumption/conservation of natural resources for the future. In reference to standard environmental economic theory, jump-diffusion dynamics for the stock of natural resources and infinite time horizon are assumed. Extensive numerical experiments complete the analysis and contribute to determine fossil fuels management policies, showing that long-term investments make the difference for the well-being of present and future generations

Information transmission and the bounds to growth

This paper studies the long run growth implications of the presence of information acquisition and transmission costs. We assume that vertical innovation requires researchers to be informed on the current version of the product they want to improve upon; and we also assume that quasi-fixed managerial inputs are required for production in the manufacturing sector. Despite the fact the increases in total factor productivity cause R&D and managerial quasi-fixed labor costs to decrease in the same way as variable labor costs, the presence of these costs is sufficient to rule out the strong scale effect at all levels of the intertemporal returns to ideas. More importantly, the upper bound of long run growth rates crucially depends on information transmission costs

Non-CO2 generating energy shares in the world : cross-country differences and polarization.

The aim of this paper is to examine the spatial distribution of non-CO2 generating energy sources in the world for the period 1990–2009, paying special attention to the evolution of cross-country disparities. To this end, after carrying out a classical convergence analysis, a more thorough investigation of the entire distribution is presented by examining its external shape, the intra-distribution dynamics and the long-run equilibrium distribution. This analysis reveals the existence of a weak, rather insignificant, convergence process and that large crosscountry differences are likely to persist in the long-run. Next, as polarization indicators are a proper way of appraising potential conflict in international environmental negotiations, we test whether, or not, the distribution dynamics concurs with the presence of polarization. Our results indicate that two poles can be clearly differentiated, one with high and other with low non-CO2 generating energy shares. In view of these findings, and to ensure a fair transition to a sustainable energy system, the paper calls for the development of an ambitious clean energy agenda, especially in countries with low non-CO2 generating energy shares

Global warming and endogenous technological change: revisiting the green paradox

How to control and limit climate change caused by a growing use of fossil fuels are among the most pressing policy challenges facing the world today. The green paradox argues that carbon taxes can exacerbate global warming problem because firms have the incentive to bring forward the sale of fossil fuels. This paper shows that when technological progress allows the extraction costs of fossil fuels to be reduced over time, and a positive R&D subsidy is paid, a growing carbon tax reveals a welfare maximizing policy

The Environmental Tax: Effects on Inequality and Growth

Within an R&D-driven growth model, this paper studies how an environmental tax and its cost both for firms and consumers affect individuals’ incentives for human capital accumulation, income inequality, and the per capita growth rate. The results show that when a low share of the environmental tax on consumption is levied, a tighter environmental tax results in an increase in individuals’ human capital accumulation and income inequality between both unskilled and skilled workers and among skilled workers and spurs the per capita growth rate. A numerical simulation for the U.S. economy illustrates the results and shows that the increase in income inequality is very modest compared to the large increase in the per capita output growth rate. Moreover, it can be seen that a no-carbon-pricing green policy with command and control instruments, for example, has a negative effect on both the incentive for human capital accumulation and the per capita growth rate

Global Warming and Endogenous Technological Change: Revisiting the Green Paradox

One of the most pressing policy challenges facing the world today concerns how to mitigate global warming while improving people’s well-being. The green paradox argues that increasing taxes on CO2 emissions exacerbates global warming in the present because firms have the incentive to bring forward the extraction and sale of fossil fuels. This paper shows that whenever technological progress allows the extraction costs of fossil fuels to be reduced over time and a positive R&D subsidy is paid, a growing tax on CO2 emissions reveals a welfare maximizing policy