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Is there a Green Paradox?

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  • Michael Hoel
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    Abstract

    A sufficiently rapidly rising carbon tax may increase near-term emissions compared with the case of no carbon tax. Even so, such a carbon tax path may reduce total costs related to climate change, since the tax may reduce total carbon extraction. A government cannot commit to a specific carbon tax rate in the distant future. For reasonable assumptions about expectation formation, a higher present carbon tax will reduce near-term carbon emissions. Moreover, whatever the expectations about future tax rates are, near-term emissions will decline for a sufficiently high carbon tax. However, if the near-term tax rate for some reason is set below its optimal level, increased concern for the climate may change taxes in a manner that increases near-term emissions.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-09/cesifo1_wp3168.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3168.

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    Date of creation: 2010
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    Handle: RePEc:ces:ceswps:_3168

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    Related research

    Keywords: climate change; exhaustible resources; green paradox; carbon tax;

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    References

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    1. Rick van der Ploeg & Cees Withagen, 2010. "Is There Really a Green Paradox?," OxCarre Working Papers, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford 035, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    2. Ayong Le Kama, Alain & Fodha, Mouez & Lafforgue, Gilles, 2011. "Optimal Carbon Capture and Storage Policies," LERNA Working Papers, LERNA, University of Toulouse 11.13.347, LERNA, University of Toulouse.
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    Cited by:
    1. Michielsen, T.O., 2011. "Brown Backstops versus the Green Paradox (Revision of CentER DP 2011-076)," Discussion Paper, Tilburg University, Center for Economic Research 2011-110, Tilburg University, Center for Economic Research.
    2. Habermacher, Florian & Kirchgässner, Gebhard, 2011. "Climate Effects of Carbon Taxes, Taking into Account Possible Other Future Climate Measures," Economics Working Paper Series, University of St. Gallen, School of Economics and Political Science 1110, University of St. Gallen, School of Economics and Political Science.
    3. Jon Strand, 2010. "Taxes versus Cap-and-Trade in Climate Policy when only some Fuel Importers Abate," CESifo Working Paper Series 3233, CESifo Group Munich.
    4. Edenhofer, Ottmar & Kalkuhl, Matthias, 2011. "When do increasing carbon taxes accelerate global warming? A note on the green paradox," Energy Policy, Elsevier, Elsevier, vol. 39(4), pages 2208-2212, April.
    5. Benjamin Jones & Michael Keen & Jon Strand, 2013. "Fiscal implications of climate change," International Tax and Public Finance, Springer, Springer, vol. 20(1), pages 29-70, February.
    6. Marc Gronwald, 2011. "A Characterization of Oil Price Behavior - Evidence from Jump Models," CESifo Working Paper Series 3644, CESifo Group Munich.
    7. Edwin van der Werf & Corrado Di Maria, 2011. "Unintended Detrimental Effects of Environmental Policy: The Green Paradox and Beyond," CESifo Working Paper Series 3466, CESifo Group Munich.
    8. Michielsen, T.O., 2011. "Brown Backstops versus the Green Paradox (Replaced by CentER DP 2011-110)," Discussion Paper, Tilburg University, Center for Economic Research 2011-076, Tilburg University, Center for Economic Research.
    9. Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2012. "The Role of Carbon Capture and Sequestration Policies for Climate Change Mitigation," CESifo Working Paper Series 3834, CESifo Group Munich.
    10. Habermacher, Florian, 2011. "Optimal Fuel-Specific Carbon Pricing and Time Dimension of Leakage," Economics Working Paper Series, University of St. Gallen, School of Economics and Political Science 1144, University of St. Gallen, School of Economics and Political Science, revised Jan 2012.

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