Simultaneous Supplies of Dirty and Green Fuels with Capacity Constraints

Is there a Green Paradox?

Marc Gronwald, Ngo Van Long, Luise Röpke

Research output: Working paperDiscussion paper

14 Downloads (Pure)

Abstract

This paper studies some possible unintended consequences of alternative climate policies, using a resource extraction framework with heterogeneous deposits and energy sources, thus extending the scope of the theory of the green paradox. A key feature of the model is that there is a capacity constraint on a green backstop resource. This feature implies the simultaneous use of the expensive backstop resource and the cheaper exhaustible resources, over some interval of time. The model considers two dirty exhaustible resources, reflecting the heterogeneity of energy sources with respect to cost structure and carbon content. The policies under consideration are taxation of the dirty resources and the promotion of the green resource via subsidies or capacity-increasing measures. We complement our analytical investigation by a numerical analysis of the welfare effects of the different policies, using specific functional forms of social damage functions. The evolution of the stock of atmospheric carbon is modeled under alternative assumptions about the accumulation of anthropogenic carbon in the atmosphere. The key findings that emerge from this paper, compared to a baseline scenario without policy intervention, are that (1) expanding the capacity of the renewable energy sector, without additional policy measures, can decrease social welfare, (2) both the capacity expansion and the subsidy on green energy lead to increases in short-term emissions, and (3) none of the analyzed policy measures leads to a decrease in the aggregate duration of the extraction of the exhaustible resources.
Original languageEnglish
PublisherUniversity of Aberdeen Business School
Number of pages58
Publication statusPublished - Dec 2015

Publication series

NameDiscussion Paper in Economics
PublisherUniversity of Aberdeen
No.18
Volume15
ISSN (Electronic)0143-4543

Fingerprint

Resources
Paradox
Capacity constraints
Carbon
Exhaustible resources
Energy sources
Subsidies
Policy measures
Taxation
Social welfare
Renewable energy
Climate policy
Cost structure
Unintended consequences
Scenarios
Atmosphere
Welfare effects
Functional form
Green energy
Capacity expansion

Keywords

  • capacity constraints
  • green paradox
  • climate change

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

Gronwald, M., Long, N. V., & Röpke, L. (2015). Simultaneous Supplies of Dirty and Green Fuels with Capacity Constraints: Is there a Green Paradox? (Discussion Paper in Economics; Vol. 15, No. 18). University of Aberdeen Business School.

Simultaneous Supplies of Dirty and Green Fuels with Capacity Constraints : Is there a Green Paradox? / Gronwald, Marc; Long, Ngo Van; Röpke, Luise.

University of Aberdeen Business School, 2015. (Discussion Paper in Economics; Vol. 15, No. 18).

Research output: Working paperDiscussion paper

Gronwald, M, Long, NV & Röpke, L 2015 'Simultaneous Supplies of Dirty and Green Fuels with Capacity Constraints: Is there a Green Paradox?' Discussion Paper in Economics, no. 18, vol. 15, University of Aberdeen Business School.
Gronwald M, Long NV, Röpke L. Simultaneous Supplies of Dirty and Green Fuels with Capacity Constraints: Is there a Green Paradox? University of Aberdeen Business School. 2015 Dec. (Discussion Paper in Economics; 18).
Gronwald, Marc ; Long, Ngo Van ; Röpke, Luise. / Simultaneous Supplies of Dirty and Green Fuels with Capacity Constraints : Is there a Green Paradox?. University of Aberdeen Business School, 2015. (Discussion Paper in Economics; 18).
@techreport{d415cfe605524421a293c3bd26b870f5,
title = "Simultaneous Supplies of Dirty and Green Fuels with Capacity Constraints: Is there a Green Paradox?",
abstract = "This paper studies some possible unintended consequences of alternative climate policies, using a resource extraction framework with heterogeneous deposits and energy sources, thus extending the scope of the theory of the green paradox. A key feature of the model is that there is a capacity constraint on a green backstop resource. This feature implies the simultaneous use of the expensive backstop resource and the cheaper exhaustible resources, over some interval of time. The model considers two dirty exhaustible resources, reflecting the heterogeneity of energy sources with respect to cost structure and carbon content. The policies under consideration are taxation of the dirty resources and the promotion of the green resource via subsidies or capacity-increasing measures. We complement our analytical investigation by a numerical analysis of the welfare effects of the different policies, using specific functional forms of social damage functions. The evolution of the stock of atmospheric carbon is modeled under alternative assumptions about the accumulation of anthropogenic carbon in the atmosphere. The key findings that emerge from this paper, compared to a baseline scenario without policy intervention, are that (1) expanding the capacity of the renewable energy sector, without additional policy measures, can decrease social welfare, (2) both the capacity expansion and the subsidy on green energy lead to increases in short-term emissions, and (3) none of the analyzed policy measures leads to a decrease in the aggregate duration of the extraction of the exhaustible resources.",
keywords = "capacity constraints, green paradox, climate change",
author = "Marc Gronwald and Long, {Ngo Van} and Luise R{\"o}pke",
year = "2015",
month = "12",
language = "English",
series = "Discussion Paper in Economics",
publisher = "University of Aberdeen Business School",
number = "18",
type = "WorkingPaper",
institution = "University of Aberdeen Business School",

}

TY - UNPB

T1 - Simultaneous Supplies of Dirty and Green Fuels with Capacity Constraints

T2 - Is there a Green Paradox?

AU - Gronwald, Marc

AU - Long, Ngo Van

AU - Röpke, Luise

PY - 2015/12

Y1 - 2015/12

N2 - This paper studies some possible unintended consequences of alternative climate policies, using a resource extraction framework with heterogeneous deposits and energy sources, thus extending the scope of the theory of the green paradox. A key feature of the model is that there is a capacity constraint on a green backstop resource. This feature implies the simultaneous use of the expensive backstop resource and the cheaper exhaustible resources, over some interval of time. The model considers two dirty exhaustible resources, reflecting the heterogeneity of energy sources with respect to cost structure and carbon content. The policies under consideration are taxation of the dirty resources and the promotion of the green resource via subsidies or capacity-increasing measures. We complement our analytical investigation by a numerical analysis of the welfare effects of the different policies, using specific functional forms of social damage functions. The evolution of the stock of atmospheric carbon is modeled under alternative assumptions about the accumulation of anthropogenic carbon in the atmosphere. The key findings that emerge from this paper, compared to a baseline scenario without policy intervention, are that (1) expanding the capacity of the renewable energy sector, without additional policy measures, can decrease social welfare, (2) both the capacity expansion and the subsidy on green energy lead to increases in short-term emissions, and (3) none of the analyzed policy measures leads to a decrease in the aggregate duration of the extraction of the exhaustible resources.

AB - This paper studies some possible unintended consequences of alternative climate policies, using a resource extraction framework with heterogeneous deposits and energy sources, thus extending the scope of the theory of the green paradox. A key feature of the model is that there is a capacity constraint on a green backstop resource. This feature implies the simultaneous use of the expensive backstop resource and the cheaper exhaustible resources, over some interval of time. The model considers two dirty exhaustible resources, reflecting the heterogeneity of energy sources with respect to cost structure and carbon content. The policies under consideration are taxation of the dirty resources and the promotion of the green resource via subsidies or capacity-increasing measures. We complement our analytical investigation by a numerical analysis of the welfare effects of the different policies, using specific functional forms of social damage functions. The evolution of the stock of atmospheric carbon is modeled under alternative assumptions about the accumulation of anthropogenic carbon in the atmosphere. The key findings that emerge from this paper, compared to a baseline scenario without policy intervention, are that (1) expanding the capacity of the renewable energy sector, without additional policy measures, can decrease social welfare, (2) both the capacity expansion and the subsidy on green energy lead to increases in short-term emissions, and (3) none of the analyzed policy measures leads to a decrease in the aggregate duration of the extraction of the exhaustible resources.

KW - capacity constraints

KW - green paradox

KW - climate change

M3 - Discussion paper

T3 - Discussion Paper in Economics

BT - Simultaneous Supplies of Dirty and Green Fuels with Capacity Constraints

PB - University of Aberdeen Business School

ER -