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Announcing climate policy: Can a green paradox arise without scarcity?

  • Smulders, Sjak
  • Tsur, Yacov
  • Zemel, Amos

Unintended consequences of a pre-announced climate policy are studied within a framework that allows for competition between polluting and clean energy sources. We show that early announcement of a carbon tax gives rise to a “green-paradox,” in that it increases emissions in the interim period (between announcement and actual implementation), irrespective of the scarcity of fossil fuels. The paradoxical outcome is driven by consumption-saving tradeoffs facing households who seek to smooth consumption over time and 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.

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File URL: http://www.sciencedirect.com/science/article/pii/S009506961200071X
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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 64 (2012)
Issue (Month): 3 ()
Pages: 364-376

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Handle: RePEc:eee:jeeman:v:64:y:2012:i:3:p:364-376
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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  1. Corrado Di Maria & Edwin van der Werf, 2006. "Carbon Leakage Revisited: Unilateral Climate Policy with Directed Technical Change," Working Papers 2006.94, Fondazione Eni Enrico Mattei.
  2. 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.
  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 2008.92, Fondazione Eni Enrico Mattei.
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