Buy Coal or Kick-Start Green Innovation? Energy Policies in an Open Economy

Abstract

This paper analyses two unilateral policies available to countries that want to rapidly curb carbon emissions in the global economy, but do not own any fossil fuel resources. If fossil fuel owners do not cooperate in CO 2 emission reduction efforts, the only strategy to reduce their fossil fuels' use is to exploit the interconnectedness of production given by international trade. We compare a Pigouvian approach, namely a subsidy for renewable energy prices, and a Coasian supply-side strategy, buying extractive rights over fossil fuel deposits abroad. Using a dynamic North-South trade model with endogenous innovation, we show how these policies, designed to prevent an environmental disaster, have different cost and welfare profiles. If fossil fuel deposits can be purchased at their market price, the supply-side policy achieves the highest welfare. If instead the fossil fuel owners require a full compensation for their income loss, subsidies for renewable energy inputs can result in higher welfare, but only if the resource-rich region has less advanced technologies for green energy production than the countries implementing the policy.

Hard dimensions evaluation in sustainable supply chain management for environmentally adaptive and mitigated adverse eco‐effect environmental policies

“…It can be concluded that in companies intending to develop eco‐friendly supply chain management, ‘innovation’ plays an important role; hence, more investment in this area is required. The findings of Ravetti et al (2020) also acknowledged that ‘innovation’ has a positive and direct impact on the company's environmental performance. As such, companies in polluting industries need innovation to stay active in a competitive market (Ravetti et al, 2020).…”

“…The findings of Ravetti et al (2020) also acknowledged that ‘innovation’ has a positive and direct impact on the company's environmental performance. As such, companies in polluting industries need innovation to stay active in a competitive market (Ravetti et al, 2020). On the other hand, the results imply that in companies that aim to mitigate the negative effects of their products on the environment, ‘technologies for cleaner production’ has a significant influence that assists their supply chain in becoming environmentally sustainable; therefore, investments in technologies are essential.…”

“…For implementing green innovation, factors such as cost efficiency, green process management, scarcity of natural resources and ecosystem need to be taken into account (Novitasari & Agustia, 2021). According to Ravetti et al (2020), innovation in oil and gas industry can guide countries to alter to green growth paths and thus can efficiently lead to clean energy production (Ravetti et al, 2020).…”

Green Trend in Global Energy Development: Tendencies and Opportunities

“…The need to reduce the effects of climate change and increase the decarbonization of the world's economies by reducing air emissions, greening production, and expanding the use of alternative energy sources is taken into account by most countries. The transformation of the global energy sector plays a special role in achieving these goals (Xie et al, 2020;Lorente et al, 2020;Ravetti et al, 2020).…”

Planning the R&D of Marine Renewable Energy Resources: Avoiding Bottlenecks and Ensuring Sustainable Development in Developing Marine Economies

“…Thus, Odam and de Vries (2020) suggest that governments should carefully implement RERs policies guided by learning curve estimation. The more common RERs policies include low-carbon policies (Wendling et al, 2020), RERs production subsidies (Ravetti et al, 2020), RERs portfolio standards (Wendling et al, 2020), clean energy-related economic policies (Chen and Kim, 2020), and so on. At present, the application of RERs is recognized by the vast majority of residents in most of developing countries, and they have a willingness to consume RERs.…”