Brown Backstops versus the Green Paradox (Revision of CentER DP 2011-076)
AbstractAnticipated 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 InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2011-110.
Date of creation: 2011
Date of revision:
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Web page: http://center.uvt.nl
carbon tax; green paradox; exhaustible resource; backstop; climate change;
Find related papers by JEL classification:
- Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-01 (All new papers)
- NEP-ENE-2011-11-01 (Energy Economics)
- NEP-ENV-2011-11-01 (Environmental Economics)
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