Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/173022
Authors: 
Benchekroun, Hassan
van der Meijden, Gerard C.
Withagen, Cees A.
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6746
Abstract: 
We show that OPEC’s market power contributes to global warming by enabling producers of relatively expensive and dirty oil to start producing before OPEC reserves are depleted. We fully characterize the equilibrium of a cartel-fringe model and use a calibration to examine the importance of this extraction sequence effect. While welfare under the cartel-fringe equilibrium can be significantly lower than under a first-best outcome, almost all of this welfare loss is due to the sequence effect. Moreover, the recent boom in shale oil reserves may reduce social welfare and renewables subsidies can increase the carbon content of current extraction.
Subjects: 
cartel-fringe
climate policy
non-renewable resource
Herfindahl rule
limit pricing
JEL: 
Q31
Q42
Q54
Q58
Document Type: 
Working Paper

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