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Global Warming and the Green Paradox

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  • Frederick van der Ploeg
  • Cees Withagen

Abstract

Announcing a future carbon tax or a sufficiently fast rising carbon tax encourages fossil fuel owners to extract reserves more aggressively, thus exacerbating global warming. These policies also encourage more fossil fuel to be locked in the crust of the earth which can offset adverse weak Green Paradox effects. A renewables subsidy has similar weak Green Paradox effects. Green welfare drops (strong Green Paradox) if the beneficial effects for the climate of locking up more fossil fuel outweigh the short-run weak Green Paradox effects. Neither the weak nor the strong Green Pradox occurs for the first-best Pigovian carbon tax. Within the context of a green Ramsey growth model the qualitative nature of the different phases of fossil fuel and renewables use depends crucially on the initial stocks of fossil fuel reserves and capital. We examne how climate policies are affected by growth and development, and also when not the renewable but coal is the effective backstop.

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Bibliographic Info

Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 116.

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Date of creation: 2013
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Handle: RePEc:oxf:oxcrwp:116

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Keywords: fossil fuel; renewables; coal; economic growth; global warming; carbon tax; Green Paradox;

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  1. Thomas Eichner & Rüdiger Pethig, 2011. "Carbon Leakage, The Green Paradox, And Perfect Future Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 767-805, 08.
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  7. van der Ploeg, Frederick & Withagen, Cees, 2012. "Is there really a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 342-363.
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