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Supply-Side Climate Policy: On the Role of Exploration and Asymmetric Information

  • Thomas EichnerEmail author
  • Rüdiger Pethig
Article

Abstract

In the world economy with interdependent markets for fossil fuel deposits and extracted fossil fuel, a coalition of countries may fight climate change by purchasing fossil fuel deposits for preservation. Harstad (J Polit Econ 120:77–115, 2012) has shown that the coalition’s supply-side climate policy implements the first-best. The present paper focuses on the role exploration and asymmetric information with respect to climate damage plays for the efficiency of unilateral supply-side climate policy. Under the assumption of non-strategic exploration and truthful reporting of climate damage, the deposit policy turns out to be efficient. If exploration is used strategically or the coalition misreports its climate damage, however, the deposit policy becomes inefficient.

Keywords

Coalition Deposit Extraction Exploration Asymmetric Information 

JEL Classification

Q31 Q38 Q55 

Notes

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Copyright information

© Springer Nature B.V. 2019

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of HagenHagenGermany
  2. 2.Department of EconomicsUniversity of SiegenSiegenGermany

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