Skip to Main content Skip to Navigation
New interface
Journal articles

The Grey Paradox: How fossil-fuel owners can benefit from carbon taxation

Abstract : This paper considers the distributional impact of optimal carbon taxation on fossil-fuel owners. A carbon-emitting exhaustible resource competes with a dirtier abundant resource and a clean backstop. A time-dependent carbon tax is set to optimally use these resources under a cap constraint over atmospheric concentration. As the cap is tightened, the dirtier resource becomes less competitive compared to the exhaustible resource (the “competition effect”), but the timing and duration of extraction of the exhaustible resource is modified (the “timing effect”). We provide analytical expressions of these effects, and determine conditions over CO2 size of reserves, pollution contents, extraction costs and demand elasticity such that the exhaustible-resource owners’ profits increase as the ceiling is tightened. Calibrations for the transport and power sectors suggest that the profits of conventional-oil and natural-gas owners increase compared to a baseline without regulation for plausible carbon-ceiling values.
Document type :
Journal articles
Complete list of metadata

Cited literature [43 references]  Display  Hide  Download
Contributor : Caroline Bauer Connect in order to contact the contributor
Submitted on : Tuesday, October 31, 2017 - 5:32:35 PM
Last modification on : Friday, April 29, 2022 - 10:13:20 AM



Renaud Coulomb, Fanny Henriet. The Grey Paradox: How fossil-fuel owners can benefit from carbon taxation. Journal of Environmental Economics and Management, 2018, 87, pp.206-223. ⟨10.1016/j.jeem.2017.07.001⟩. ⟨hal-01626780⟩



Record views