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

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

Abstract

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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  • Smulders, Sjak & Tsur, Yacov & Zemel, Amos, 2012. "Announcing climate policy: Can a green paradox arise without scarcity?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 364-376.
    • Handle: RePEc:eee:jeeman:v:64:y:2012:i:3:p:364-376
    DOI: 10.1016/j.jeem.2012.02.007
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    References listed on IDEAS

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    More about this item

    Keywords

    Climate policy; Carbon tax; Green paradox;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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