Loading...
Climate Policy and Resource Extraction with Variable Markups and Imperfect Substitutes
Curuk,Malik Sen,Suphi
Curuk,Malik
Sen,Suphi
Abstract
In a resource extraction model that features imperfect substitution and endogenous market power, we analytically characterize the effect of anticipated future demand shocks on the resource extraction path. We show that the resource owner's market share and reserves-to-extraction ratio are sufficient to calculate the supply response under constant elasticity of substitution between alternative energy resources. The analytical characterization of the extraction response allows us to conduct scenario analyses based on available oil market data. Applying data on OPEC, we find a relatively small increase in current extraction due to an anticipated decrease in the price of alternative energy resources, which implies that endogenous markup adjustments of OPEC countries largely reduce the adverse consequences of anticipated climate policies due to intertemporal carbon leakage.
Description
Publisher Copyright: © 2023 The Association of Environmental and Resource Economists. All rights reserved.
Date
2023-07-01
Journal Title
Journal ISSN
Volume Title
Publisher
Files
Loading...
723704.pdf
Adobe PDF, 404.77 KB
Research Projects
Organizational Units
Journal Issue
Keywords
Climate policy, Green paradox, Imperfect competition, Imperfect substitution, Nonrenewable energy resources, Oil, Variable markups, SDG 13 - Climate Action
Citation
Curuk, M & Sen, S 2023, 'Climate Policy and Resource Extraction with Variable Markups and Imperfect Substitutes', Journal of the Association of Environmental and Resource Economists, vol. 10, no. 4, pp. 1091-1120. https://doi.org/10.1086/723704