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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
DOI: 10.1016/j.jeem.2012.02.007
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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  1. 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.
  2. Thomas Eichner & Rüdiger Pethig, 2009. "Carbon Leakage, the Green Paradox and Perfect Future Markets," CESifo Working Paper Series 2542, CESifo Group Munich.
  3. Corrado Maria & Edwin Werf, 2008. "Carbon leakage revisited: unilateral climate policy with directed technical change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(2), pages 55-74, February.
  4. Michael Hoel, 2008. "Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions," CESifo Working Paper Series 2492, CESifo Group Munich.
  5. Sinn, Hans-Werner, 2008. "Public policies against global warming: A supply side approach," Munich Reprints in Economics 19638, University of Munich, Department of Economics.
  6. Hoel, Michael, 2011. "The supply side of CO2 with country heterogeneity," Memorandum 08/2011, Oslo University, Department of Economics.
  7. Smulders, Sjak & Tsur, Yacov & Zemel, Amos, 2010. "Uncertain Climate Policy and the Green Paradox," Discussion Papers 93129, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
  8. Barrett, Alan & Kearney, Ide & O'Brien, Martin, 2007. "Quarterly Economic Commentary, Summer 2007," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20072, December.
  9. 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.
  10. van der Werf, Edwin & Di Maria, Corrado, 2012. "Imperfect Environmental Policy and Polluting Emissions: The Green Paradox and Beyond," International Review of Environmental and Resource Economics, now publishers, vol. 6(2), pages 153-194, March.
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