Research article - Peer-reviewed, 2022
The black paradox
Hart, Rob; Gars, JohanAbstract
We model competition between an oil monopolist and competitive suppliers of coal and renewable energy in a dynamic general equilibrium framework. We show that market power- which disrupts the order of extraction-may lead to higher long-run emissions by encouraging early extraction of dirty fuels such as coal which would otherwise remain in the ground permanently; simply banning coal burning may be better than Pigovian taxation. Market power can of course be corrected by production subsidies to the monopolist, but when distribution affects welfare a better option is to offer subsidies to renewable energy, which force the oil monopolist to reduce her (limit) price but are never actually paid out.Keywords
Market power; OPEC; Coal; Climate changePublished in
European Economic Review2022, volume: 148, article number: 104211
Publisher: ELSEVIER
Authors' information
Swedish University of Agricultural Sciences, Department of Economics
Gars, Johan
Royal Swedish Academy of Sciences
Sustainable Development Goals
SDG7 Affordable and clean energy
SDG12 Ensure sustainable consumption and production patterns
UKÄ Subject classification
Economics
Publication Identifiers
DOI: https://doi.org/10.1016/j.euroecorev.2022.104211
URI (permanent link to this page)
https://res.slu.se/id/publ/118731