The Grey Paradox: How fossil-fuel owners can benefit from carbon taxation - Paris-Jourdan Sciences Économiques Access content directly
Journal Articles Journal of Environmental Economics and Management Year : 2018

The Grey Paradox: How fossil-fuel owners can benefit from carbon taxation

Abstract

This paper considers the distributional impact of optimal carbon taxation on fossil-fuel owners. A carbon-emitting exhaustible resource competes with a dirtier abundant resource and a clean backstop. A time-dependent carbon tax is set to optimally use these resources under a cap constraint over atmospheric concentration. As the cap is tightened, the dirtier resource becomes less competitive compared to the exhaustible resource (the “competition effect”), but the timing and duration of extraction of the exhaustible resource is modified (the “timing effect”). We provide analytical expressions of these effects, and determine conditions over CO2 size of reserves, pollution contents, extraction costs and demand elasticity such that the exhaustible-resource owners’ profits increase as the ceiling is tightened. Calibrations for the transport and power sectors suggest that the profits of conventional-oil and natural-gas owners increase compared to a baseline without regulation for plausible carbon-ceiling values.
No file

Dates and versions

hal-01626780 , version 1 (31-10-2017)

Identifiers

Cite

Renaud Coulomb, Fanny Henriet. The Grey Paradox: How fossil-fuel owners can benefit from carbon taxation. Journal of Environmental Economics and Management, 2018, 87, pp.206-223. ⟨10.1016/j.jeem.2017.07.001⟩. ⟨hal-01626780⟩
301 View
1 Download

Altmetric

Share

Gmail Mastodon Facebook X LinkedIn More