When do increasing carbon taxes accelerate global warming? A note on the green paradox
The "green paradox" by Hans-Werner Sinn suggests that increasing resource taxes accelerate global warming because resource owners increase near-term extraction in fear of higher future taxation. In this note we show that this effect does only occur for the specific set of carbon taxes that increase at a rate higher than the effective discount rate of the resource owners. We calculate a critical initial value for the carbon tax that leads to a decreased cumulative consumption over the entire (infinite) time horizon. Applying our formal findings to carbon taxes for several mitigation targets, we conclude that there is a low risk of a green paradox in case the regulator implements and commits to a permanently mal-adjusted tax. This remaining risk can be avoided by emissions trading scheme as suggested by Sinn--as long as the emission caps are set appropriately and the intertemporal permit market works correctly.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- R. Quentin Grafton & Tom Kompas & Ngo Van Long, 2010. "Biofuels Subsidies and the Green Paradox," CESifo Working Paper Series 2960, CESifo Group Munich.
- Nicholas Stern, 2008. "The Economics of Climate Change," American Economic Review, American Economic Association, vol. 98(2), pages 1-37, May.
- Geoffrey Heal, 2009. "Climate Economics: A Meta-Review and Some Suggestions for Future Research," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(1), pages 4-21, Winter.
- Reyer Gerlagh, 2011.
"Too Much Oil,"
CESifo Economic Studies,
CESifo, vol. 57(1), pages 79-102, March.
- Matthias Kalkuhl & Ottmar Edenhofer, 2010. "Prices vs. Quantities and the Intertemporal Dynamics of the Climate Rent," CESifo Working Paper Series 3044, CESifo Group Munich.
- 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.
- Frederick Van der Ploeg & Cees A. Withagen, 2010. "Is There Really a Green Paradox?," CESifo Working Paper Series 2963, CESifo Group Munich.
- Rick van der Ploeg & Cees Withagen, 2010. "Is There Really a Green Paradox?," OxCarre Working Papers 035, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
- Frederick van der Ploeg & Cees Withagen, 2010. "Is there really a Green Paradox?," Tinbergen Institute Discussion Papers 10-020/3, Tinbergen Institute, revised 27 Aug 2012.
- Michael Hoel, 2010.
"Is there a Green Paradox?,"
CESifo Working Paper Series
3168, CESifo Group Munich.
- Sinn, Hans-Werner, 2008.
"Public policies against global warming: A supply side approach,"
Munich Reprints in Economics
19638, University of Munich, Department of Economics.
- Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
- Adelman, M. A., 1986. "Oil producing countries' discount rates," Resources and Energy, Elsevier, vol. 8(4), pages 309-329, December.
When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:39:y:2011:i:4:p:2208-2212. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.