Race to burn the last ton of carbon and the risk of stranded assets

Working paper

A cap on global warming implies a tighter carbon budget which can be enforced with a credible second-best renewable energy subsidy designed to lock up fossil fuel and curb cumulative emissions. Such a subsidy brings forward the end of the fossil fuel era, but accelerates fossil fuel extraction and global warming in the short run. A weaker fossil fuel oligopoly implies that anticipation of a given global carbon budget induces fossil producers to deplete reserves more voraciously and accelerate...

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Authors: Van der Ploeg, R

• Publication status: Published
• Publisher: University of Oxford Publisher's website
• Series: OxCarre Papers
• Publication date: 2017-11-28
• Paper number: 201
• Keywords: carbon budget; limit pricing; regime shift; green paradox; voracious extraction; oligopolistic resource markets; second-best climate policy; stranded assets