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Announcing Climate Policy: Can a Green Paradox Arise without Scarcity?

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Author Info

  • Sjak Smulders
  • Yacov Tsur
  • Amos Zemel

Abstract

Unintended consequences of a pre-announced climate policy have been studied in a variety of situations. We show that early announcement of a carbon tax gives rise to a “Green-Paradox,” in that it increases polluting emissions in the interim period (between announcement and actual implementation), irrespective of the scarcity of fossil fuels. The phenomenon 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. The paradoxical outcome is driven by consumption-saving tradeoffs facing households who seek to smooth consumption over time.

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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-2010-12/cesifo1_wp3307.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3307.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3307

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Related research

Keywords: climate policy; carbon tax; green paradox; uncertainty;

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References

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  1. Frederick Van der Ploeg & Cees A. Withagen, 2010. "Is There Really a Green Paradox?," CESifo Working Paper Series 2963, CESifo Group Munich.
  2. Di Maria, C. & Werf, E.H. van der, 2005. "Carbon Leakage Revisited: Unilateral Climate Policy with Directed Technical Change," Discussion Paper, Tilburg University, Center for Economic Research 2005-68, Tilburg University, Center for Economic Research.
  3. 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.
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Citations

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Cited by:
  1. Darko Jus & Volker Meier, 2012. "Announcing is Bad, Delaying is Worse: Another Pitfall in Well-Intended Climate Policy," CESifo Working Paper Series 3844, CESifo Group Munich.
  2. Corrado Di Maria & Ian Lange & Edwin van der Werf, 2012. "Should We Be Worried About the Green Paradox? Announcement Effects of the Acid Rain Program," Working Papers, Fondazione Eni Enrico Mattei 2012.49, Fondazione Eni Enrico Mattei.
  3. 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.
  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. Eric Bahel & Walid Marrouch & Gerard Gaudet, 2010. "The Economics of Oil, Biofuel and Food Commodities," Working Papers e07-26, Virginia Polytechnic Institute and State University, Department of Economics.
  6. Hart, Rob & Spiro, Daniel, 2011. "The elephant in Hotelling's room," Energy Policy, Elsevier, Elsevier, vol. 39(12), pages 7834-7838.
  7. 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.
  8. Smulders, Sjak & Withagen, Cees, 2012. "Green growth -- lessons from growth theory," Policy Research Working Paper Series 6230, The World Bank.

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