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Brown Backstops versus the Green Paradox (Revision of CentER DP 2011-076)

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  • Michielsen, T.O.

    (Tilburg University, Center for Economic Research)

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    Abstract

    Anticipated and unilateral climate policies are ineffective when fossil fuel owners respond by shifting supply intertemporally (the green paradox) or spatially (carbon leakage). These mechanisms rely crucially on the exhaustibility of fossil fuels. We analyze the effect of anticipated and unilateral climate policies on emissions in a simple model with two fossil fuels: one scarce and dirty (oil), the other abundant and dirtier (coal). We derive conditions for a ’green orthodox’: anticipated climate policy may reduce current emissions, and unilateral measures may unintentionally reduce emissions in other countries. Calibrations suggest that intertemporal carbon leakage (between -3% and 1%) is less of a concern than spatial leakage (19-39%).

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    Bibliographic Info

    Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2011-110.

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    Date of creation: 2011
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    Handle: RePEc:dgr:kubcen:2011110

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    Web page: http://center.uvt.nl

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    Keywords: carbon tax; green paradox; exhaustible resource; backstop; climate change;

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