The existing economics literature neglects the important role of capacity in the production of re... more The existing economics literature neglects the important role of capacity in the production of renewable energy. To fill this gap, we construct a model in which renewable energy production is tied to renewable energy capacity, which then becomes a form of capital. This capacity capital can be increased through investment, which we interpret as arising from the allocation of energy, and which therefore comes at the cost of reduced general production. Requiring societal well-being to never decline-the notion of sustainability favored by economists-we describe how society could optimally elect to split energy in this fashion, the use of non-renewable energy resources, the use of renewable energy resources, and the implied time path of societal well-being. Our model delivers an empirically satisfactory explanation for simultaneous use of non-renewable and renewable energy. We also discuss the optimality of ceasing use of non-renewable energy before the non-renewable resource stock is fully exhausted.
The US Energy Information Agency estimates that 11% of the world's total energy comes from renewa... more The US Energy Information Agency estimates that 11% of the world's total energy comes from renewable sources, a number they project will grow modestly to 15% by 2040. They also estimate that 21% of the world's electricity came from renewable energy in 2011, and they expect that to grow to 25% by 2040. These are the projections that need to be altered if global warming is to be placed under some degree of control. This thesis reviews existing literature and gathers data in order to provide projections of the renewable' share under different scenario by 2050. The analysis takes into consideration existing technologies and the projection of their development and also international policies to battle climate change.
In the past 10–15 years, innovations in hydraulic fracturing and horizontal drilling have fueled ... more In the past 10–15 years, innovations in hydraulic fracturing and horizontal drilling have fueled a boom in the production of natural gas from geological formations that were previously unprofitable. The rapid deployment of fracking has been accompanied by concerns about negative externalities. In response, a regulatory regime has emerged that requires disclosure of chemical additives, but preserves a loophole by which firms can claim that such disclosure imperils “trade secrets.” To shed light on the importance of such a disclosure rule, we combine data from wells drilled in two significant gas fields in Wyoming with disclosure data from FracFocus about injected chemicals and materials. We explore the relation between toxicity of injectants, tendency to use the trade secrets shield, and identity of the well operator and the service company that performed the frac job. Our results have implications for the impact on social net benefits of the recently reported merger between two majo...
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
Journal of Environmental Economics and Management, 1986
The paper presents a model of exploration and production in an uncertain environment. Exploration... more The paper presents a model of exploration and production in an uncertain environment. Exploration provides a by-product of information that helps predict future finds more accurately. When this information is not equally valued (at the margin) by society and industry, socially inefficient levels of exploration are chosen by industry. In this event, government intervention may be warranted. A regulator could control future prices to encourage industry to select socially preferred levels of production and exploration. Alternatively, by making public varying amounts of exploration information, incentives to industry could be adjusted. Conditions where such regulation might yield sufficient gains to society to offset regulatory costs are considered. 0 1986 Academic Press, 1~. 'This paper draws heavily from Chapter II of my Ph.D. dissertation. I wish to express my thanks to my adviser, Rich Gilbert, and to Ralph d'Arge, Mark Isaac, Todd Sandler, Bill Schulze, John Tschirhart, and an anonymous referee for helpful comments and suggestions. Of course, any remaining errors are my responsibility. 'We take social welfare to be the sum of consumer surplus and profits.
In this paper, I evaluate patterns of concentration in the Gulf of Mexico oil and gas industry, o... more In this paper, I evaluate patterns of concentration in the Gulf of Mexico oil and gas industry, one of the most important sectors for US production over the past few decades. In the 1990s, production in the Gulf was quite concentrated, and was dominated by large oil companies. But over the past decade or so this con centration has eroded, with recent levels consistent with an unconcentrated in dustry. These patterns apply for drilling and leasing as well, and are relevant to both shallow and deep water. The overall picture is an industry with strong com petition for leases, drilling and production.
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
In 1978, amid growing concerns over exposure to foreign oil producers – particularly OPEC – the U... more In 1978, amid growing concerns over exposure to foreign oil producers – particularly OPEC – the U.S. Congress instructed the Office of Technology Assessment to assess the state of U.S. oilfield production. The resulting report indicated that hundreds of billions of barrels of known oil in the United States remained unproduced because it was not economically attainable by conventional methods. The report evaluated the potential for a range of enhanced oil recovery (EOR) techniques to recover significant amounts of this 'stranded' oil; a specific focus was on the use of Carbon Dioxide (CO2), and its potential for recovering a significant fraction of this oil.
Hydraulic fracturing (HF) has transformed the North American oil and gas industry, leading to inc... more Hydraulic fracturing (HF) has transformed the North American oil and gas industry, leading to increased consumer surplus and reduced carbon emissions. While HF may have similar potential for the developing world, adoption has been limited to date, plausibly because of perceptions of potential local costs and the need to develop technical proficiency. We empirically evaluate the incremental contribution of HF in the United States. We find considerable evidence of differences in application and productivity across operating firms and vertical pairings of firms, suggesting intellectual property and learning by doing may both play important roles. At the same time, secrecy regarding the chemical composition of fluids used in HF is a potential deterrent to its application for fear of local costs. Developing countries must accommodate these characteristics if adoption of HF is to help meet energy demands and achieve climate policy goals.
There is an emerging consensus that carbon emissions must be limited. An attractive approach to p... more There is an emerging consensus that carbon emissions must be limited. An attractive approach to promoting carbon reductions is to encourage reductions in deforestation. But any such strategy must confront a basic problem: agents that might be induced to reduce their actions which would reduce forests have private information about their opportunity costs. This concern seems particularly likely to apply in situations where there are significant related risks, as agents seem highly likely to differ in their tolerance for risk. In this paper, I investigate a contracting scheme designed to mitigate the asymmetric information problem where agents are heterogeneous in their tolerance for risk. Mechanisms that recognize the potential insurance value associated with the acquisition of sequestration services, and that pay attention to landholders' private information about risk tolerance, offer a sensible way to approach the problem. These contracts are generally a cheaper approach to maintenance of forests than a simple, constant per-unit subsidy.
Part of the Business Commons This Article is brought to you for free and open access by the Econo... more Part of the Business Commons This Article is brought to you for free and open access by the Economics and Finance at Wyoming Scholars Repository. It has been accepted for inclusion in Economics and Finance Faculty Publications by an authorized administrator of Wyoming Scholars Repository. For more information, please contact
In this chapter I present a simple economic model of exploration, and then discuss some predictio... more In this chapter I present a simple economic model of exploration, and then discuss some predictions stemming from the model. I also describe some empirical phenomena relevant to exploration: trends in the probability of dry holes, the relation between oil prices and exploratory drilling, and developments in the deep water Gulf of Mexico.
Addressing global climate change is likely to require broad-based deployment of new infrastructur... more Addressing global climate change is likely to require broad-based deployment of new infrastructure. This new infrastructure is likely to be both costly to build and difficult to reverse – suggesting the deployment of new infrastructure is an example of “investment under uncertainty” (Dixit and Pindyck; 1993). In this context, a key concept is the “option value of waiting,” i.e., the potential gain in value that arises from waiting to learn more about the evolution of some key underlying stochastic ingredient, such as a commodity price or the cost of a carbon permit. We argue that this option value of waiting is likely to be increased by the presence of jumps (i.e., unexpectedly rapid changes in the key price), or fat tails (i.e., abnormally large kurtosis). Fat tails can arise from either jumps or time-varying volatility. Assuming there is some urgency in undertaking these investments, the increase in option value of waiting is worrisome, and motivates the deployment of a policy intervention that reduces this option value.
Center for Advanced Energy Studies (CAES) caesenergy.org Gateway for Accelerated Innovation in Nu... more Center for Advanced Energy Studies (CAES) caesenergy.org Gateway for Accelerated Innovation in Nuclear (GAIN) gain.inl.gov Idaho National Laboratory (INL) www.inl.gov
In this paper, we analyze the question of membership in a non-renewable resource cartel, with spe... more In this paper, we analyze the question of membership in a non-renewable resource cartel, with specific application to OPEC. Using a simple model of a non-renewable resource market, we show that the benefits of cartel membership are related to the size of remaining reserves. Domestic petroleum consumption will also influence the incentives to join the cartel if countries care about consumer interests. Using data on reserves and consumption for all oil producing countries, we show econometrically that larger reserves and lower consumption are positively associated with OPEC membership. Our regressions correctly predict membership for the vast majority of oil-producing countries.
The existing economics literature neglects the important role of capacity in the production of re... more The existing economics literature neglects the important role of capacity in the production of renewable energy. To fill this gap, we construct a model in which renewable energy production is tied to renewable energy capacity, which then becomes a form of capital. This capacity capital can be increased through investment, which we interpret as arising from the allocation of energy, and which therefore comes at the cost of reduced general production. Requiring societal well-being to never decline-the notion of sustainability favored by economists-we describe how society could optimally elect to split energy in this fashion, the use of non-renewable energy resources, the use of renewable energy resources, and the implied time path of societal well-being. Our model delivers an empirically satisfactory explanation for simultaneous use of non-renewable and renewable energy. We also discuss the optimality of ceasing use of non-renewable energy before the non-renewable resource stock is fully exhausted.
The US Energy Information Agency estimates that 11% of the world's total energy comes from renewa... more The US Energy Information Agency estimates that 11% of the world's total energy comes from renewable sources, a number they project will grow modestly to 15% by 2040. They also estimate that 21% of the world's electricity came from renewable energy in 2011, and they expect that to grow to 25% by 2040. These are the projections that need to be altered if global warming is to be placed under some degree of control. This thesis reviews existing literature and gathers data in order to provide projections of the renewable' share under different scenario by 2050. The analysis takes into consideration existing technologies and the projection of their development and also international policies to battle climate change.
In the past 10–15 years, innovations in hydraulic fracturing and horizontal drilling have fueled ... more In the past 10–15 years, innovations in hydraulic fracturing and horizontal drilling have fueled a boom in the production of natural gas from geological formations that were previously unprofitable. The rapid deployment of fracking has been accompanied by concerns about negative externalities. In response, a regulatory regime has emerged that requires disclosure of chemical additives, but preserves a loophole by which firms can claim that such disclosure imperils “trade secrets.” To shed light on the importance of such a disclosure rule, we combine data from wells drilled in two significant gas fields in Wyoming with disclosure data from FracFocus about injected chemicals and materials. We explore the relation between toxicity of injectants, tendency to use the trade secrets shield, and identity of the well operator and the service company that performed the frac job. Our results have implications for the impact on social net benefits of the recently reported merger between two majo...
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
Journal of Environmental Economics and Management, 1986
The paper presents a model of exploration and production in an uncertain environment. Exploration... more The paper presents a model of exploration and production in an uncertain environment. Exploration provides a by-product of information that helps predict future finds more accurately. When this information is not equally valued (at the margin) by society and industry, socially inefficient levels of exploration are chosen by industry. In this event, government intervention may be warranted. A regulator could control future prices to encourage industry to select socially preferred levels of production and exploration. Alternatively, by making public varying amounts of exploration information, incentives to industry could be adjusted. Conditions where such regulation might yield sufficient gains to society to offset regulatory costs are considered. 0 1986 Academic Press, 1~. 'This paper draws heavily from Chapter II of my Ph.D. dissertation. I wish to express my thanks to my adviser, Rich Gilbert, and to Ralph d'Arge, Mark Isaac, Todd Sandler, Bill Schulze, John Tschirhart, and an anonymous referee for helpful comments and suggestions. Of course, any remaining errors are my responsibility. 'We take social welfare to be the sum of consumer surplus and profits.
In this paper, I evaluate patterns of concentration in the Gulf of Mexico oil and gas industry, o... more In this paper, I evaluate patterns of concentration in the Gulf of Mexico oil and gas industry, one of the most important sectors for US production over the past few decades. In the 1990s, production in the Gulf was quite concentrated, and was dominated by large oil companies. But over the past decade or so this con centration has eroded, with recent levels consistent with an unconcentrated in dustry. These patterns apply for drilling and leasing as well, and are relevant to both shallow and deep water. The overall picture is an industry with strong com petition for leases, drilling and production.
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
In 1978, amid growing concerns over exposure to foreign oil producers – particularly OPEC – the U... more In 1978, amid growing concerns over exposure to foreign oil producers – particularly OPEC – the U.S. Congress instructed the Office of Technology Assessment to assess the state of U.S. oilfield production. The resulting report indicated that hundreds of billions of barrels of known oil in the United States remained unproduced because it was not economically attainable by conventional methods. The report evaluated the potential for a range of enhanced oil recovery (EOR) techniques to recover significant amounts of this 'stranded' oil; a specific focus was on the use of Carbon Dioxide (CO2), and its potential for recovering a significant fraction of this oil.
Hydraulic fracturing (HF) has transformed the North American oil and gas industry, leading to inc... more Hydraulic fracturing (HF) has transformed the North American oil and gas industry, leading to increased consumer surplus and reduced carbon emissions. While HF may have similar potential for the developing world, adoption has been limited to date, plausibly because of perceptions of potential local costs and the need to develop technical proficiency. We empirically evaluate the incremental contribution of HF in the United States. We find considerable evidence of differences in application and productivity across operating firms and vertical pairings of firms, suggesting intellectual property and learning by doing may both play important roles. At the same time, secrecy regarding the chemical composition of fluids used in HF is a potential deterrent to its application for fear of local costs. Developing countries must accommodate these characteristics if adoption of HF is to help meet energy demands and achieve climate policy goals.
There is an emerging consensus that carbon emissions must be limited. An attractive approach to p... more There is an emerging consensus that carbon emissions must be limited. An attractive approach to promoting carbon reductions is to encourage reductions in deforestation. But any such strategy must confront a basic problem: agents that might be induced to reduce their actions which would reduce forests have private information about their opportunity costs. This concern seems particularly likely to apply in situations where there are significant related risks, as agents seem highly likely to differ in their tolerance for risk. In this paper, I investigate a contracting scheme designed to mitigate the asymmetric information problem where agents are heterogeneous in their tolerance for risk. Mechanisms that recognize the potential insurance value associated with the acquisition of sequestration services, and that pay attention to landholders' private information about risk tolerance, offer a sensible way to approach the problem. These contracts are generally a cheaper approach to maintenance of forests than a simple, constant per-unit subsidy.
Part of the Business Commons This Article is brought to you for free and open access by the Econo... more Part of the Business Commons This Article is brought to you for free and open access by the Economics and Finance at Wyoming Scholars Repository. It has been accepted for inclusion in Economics and Finance Faculty Publications by an authorized administrator of Wyoming Scholars Repository. For more information, please contact
In this chapter I present a simple economic model of exploration, and then discuss some predictio... more In this chapter I present a simple economic model of exploration, and then discuss some predictions stemming from the model. I also describe some empirical phenomena relevant to exploration: trends in the probability of dry holes, the relation between oil prices and exploratory drilling, and developments in the deep water Gulf of Mexico.
Addressing global climate change is likely to require broad-based deployment of new infrastructur... more Addressing global climate change is likely to require broad-based deployment of new infrastructure. This new infrastructure is likely to be both costly to build and difficult to reverse – suggesting the deployment of new infrastructure is an example of “investment under uncertainty” (Dixit and Pindyck; 1993). In this context, a key concept is the “option value of waiting,” i.e., the potential gain in value that arises from waiting to learn more about the evolution of some key underlying stochastic ingredient, such as a commodity price or the cost of a carbon permit. We argue that this option value of waiting is likely to be increased by the presence of jumps (i.e., unexpectedly rapid changes in the key price), or fat tails (i.e., abnormally large kurtosis). Fat tails can arise from either jumps or time-varying volatility. Assuming there is some urgency in undertaking these investments, the increase in option value of waiting is worrisome, and motivates the deployment of a policy intervention that reduces this option value.
Center for Advanced Energy Studies (CAES) caesenergy.org Gateway for Accelerated Innovation in Nu... more Center for Advanced Energy Studies (CAES) caesenergy.org Gateway for Accelerated Innovation in Nuclear (GAIN) gain.inl.gov Idaho National Laboratory (INL) www.inl.gov
In this paper, we analyze the question of membership in a non-renewable resource cartel, with spe... more In this paper, we analyze the question of membership in a non-renewable resource cartel, with specific application to OPEC. Using a simple model of a non-renewable resource market, we show that the benefits of cartel membership are related to the size of remaining reserves. Domestic petroleum consumption will also influence the incentives to join the cartel if countries care about consumer interests. Using data on reserves and consumption for all oil producing countries, we show econometrically that larger reserves and lower consumption are positively associated with OPEC membership. Our regressions correctly predict membership for the vast majority of oil-producing countries.
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