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Announcing climate policy: Can a green paradox arise without scarcity?

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  • Smulders, Sjak
  • Tsur, Yacov
  • Zemel, Amos

Abstract

Unintended consequences of a pre-announced climate policy are studied within a framework that allows for competition between polluting and clean energy sources. We show that early announcement of a carbon tax gives rise to a “green-paradox,” in that it increases emissions in the interim period (between announcement and actual implementation), irrespective of the scarcity of fossil fuels. The paradoxical outcome is driven by consumption-saving tradeoffs facing households who seek to smooth consumption over time and holds both when the announced implementation date is taken as a credible threat and when households are skeptical about the (political) will or capability of the government to implement the policy as announced.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 64 (2012)
Issue (Month): 3 ()
Pages: 364-376

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Handle: RePEc:eee:jeeman:v:64:y:2012:i:3:p:364-376

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Web page: http://www.elsevier.com/locate/inca/622870

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Keywords: Climate policy; Carbon tax; Green paradox;

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References

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  1. Corrado Di Maria & Sjak Smulders & Edwin van der Werf, 2008. "Absolute Abundance and Relative Scarcity: Announced Policy, Resource Extraction, and Carbon Emissions," Working Papers, Fondazione Eni Enrico Mattei 2008.92, Fondazione Eni Enrico Mattei.
  2. Corrado Maria & Edwin Werf, 2008. "Carbon leakage revisited: unilateral climate policy with directed technical change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 39(2), pages 55-74, February.
  3. Frederick van der Ploeg & Cees Withagen, 2010. "Is there really a Green Paradox?," Tinbergen Institute Discussion Papers, Tinbergen Institute 10-020/3, Tinbergen Institute, revised 27 Aug 2012.
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Cited by:
  1. Partha Sen, 2013. "Unilateral Emission Cuts And Carbon Leakages In A North-South Trade Model," Working papers, Centre for Development Economics, Delhi School of Economics 232, Centre for Development Economics, Delhi School of Economics.
  2. Di Maria, Corrado & Lange, Ian & van der Werf, Edwin, 2014. "Should we be worried about the green paradox? Announcement effects of the Acid Rain Program," European Economic Review, Elsevier, Elsevier, vol. 69(C), pages 143-162.
  3. Smulders, Sjak & Withagen, Cees, 2012. "Green growth -- lessons from growth theory," Policy Research Working Paper Series, The World Bank 6230, The World Bank.
  4. Frederick van der Ploeg & Cees Withagen, 2013. "Global Warming and the Green Paradox," OxCarre Working Papers, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford 116, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  5. Bahel, Eric & Marrouch, Walid & Gaudet, Gérard, 2013. "The economics of oil, biofuel and food commodities," Resource and Energy Economics, Elsevier, Elsevier, vol. 35(4), pages 599-617.
  6. Wirl, Franz, 2014. "Taxes versus permits as incentive for the intertemporal supply of a clean technology by a monopoly," Resource and Energy Economics, Elsevier, Elsevier, vol. 36(1), pages 248-269.
  7. Darko Jus & Volker Meier, 2012. "Announcing is Bad, Delaying is Worse: Another Pitfall in Well-Intended Climate Policy," CESifo Working Paper Series, CESifo Group Munich 3844, CESifo Group Munich.
  8. Hart, Rob & Spiro, Daniel, 2011. "The elephant in Hotelling's room," Energy Policy, Elsevier, Elsevier, vol. 39(12), pages 7834-7838.

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