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ID: 127197

Green paradox of the economics of exhaustible resources / Cairns, Robert D

Cairns, Robert D	Journal Article
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2014.

Summary/Abstract

The green paradox states that an increasing tax on emissions of carbon dioxide, consonant with the expected increase in their marginal damages, may induce oil producers to shift their production toward the present and thereby to exacerbate the problem of climatic change. The model is based on Hotelling models of resource use that do not take the natural and technical features of oil production into account. Natural features include the decline of production through time according to a decline curve. Technical features include the requirement to sink investment in productive capacity. A model of a profit-maximizing firm indicates that, if these features are taken into account, the prediction of the green paradox is unlikely. Keywords

Key Words

Investment ; Economics ; Environmental Security ; Economic Power ; Energy Resources ; Energy Policy ;
Green Paradox ; Natural Decline ; Hotelling?s Rule ; Constrained Output ; Decline Curve ; Marginal Damage ;
Emissions of Carbon Dioxide

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ID: 116741

OPEC: market failure or power failure? / Cairns, Robert D; Calfucura, Enrique

Cairns, Robert D	Journal Article
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Publication

2012.

Summary/Abstract

The actions of OPEC and Saudi Arabia are discussed in terms of their objectives and their technical and social constraints. It is concluded (1) that OPEC does not act as a cartel and (2) that Hotelling's rule is not an important feature of pricing or production. OPEC's (more specifically, Saudi Arabia's) ideal policy is to keep price moderate to try to assure a market for their high reserves over the long run. Such an action would require heavy investments in capacity, including in excess capacity, for times of interruption of supply from other countries as in the 1990s and for times of high demand as in the 2000s. The action may be inconsistent with other objectives and in any case may be too difficult to achieve.

Key Words

Capacity ; Natural Decline ; Limit Price

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