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Is there a Green Paradox?

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  • Michael Hoel

Abstract

A sufficiently rapidly rising carbon tax may increase near-term emissions compared with the case of no carbon tax. Even so, such a carbon tax path may reduce total costs related to climate change, since the tax may reduce total carbon extraction. A government cannot commit to a specific carbon tax rate in the distant future. For reasonable assumptions about expectation formation, a higher present carbon tax will reduce near-term carbon emissions. Moreover, whatever the expectations about future tax rates are, near-term emissions will decline for a sufficiently high carbon tax. However, if the near-term tax rate for some reason is set below its optimal level, increased concern for the climate may change taxes in a manner that increases near-term emissions.

Suggested Citation

  • Michael Hoel, 2010. "Is there a Green Paradox?," CESifo Working Paper Series 3168, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3168
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3168.pdf
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    References listed on IDEAS

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    1. 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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    Cited by:

    1. Eisenack, Klaus & Edenhofer, Ottmar & Kalkuhl, Matthias, 2012. "Resource rents: The effects of energy taxes and quantity instruments for climate protection," Energy Policy, Elsevier, vol. 48(C), pages 159-166.
    2. Gronwald, Marc, 2012. "A characterization of oil price behavior — Evidence from jump models," Energy Economics, Elsevier, vol. 34(5), pages 1310-1317.
    3. Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2015. "The Role of Carbon Capture and Sequestration Policies for Climate Change Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 55-80, January.
    4. Alex Bowen, 2014. "Green growth," Chapters,in: Handbook of Sustainable Development, chapter 15, pages 237-251 Edward Elgar Publishing.
    5. Edwin van der Werf & Corrado Di Maria, 2011. "Unintended Detrimental Effects of Environmental Policy: The Green Paradox and Beyond," CESifo Working Paper Series 3466, CESifo Group Munich.
    6. Edenhofer, Ottmar & Kalkuhl, Matthias, 2011. "When do increasing carbon taxes accelerate global warming? A note on the green paradox," Energy Policy, Elsevier, vol. 39(4), pages 2208-2212, April.
    7. Habermacher, Florian & Kirchgässner, Gebhard, 2011. "Climate Effects of Carbon Taxes, Taking into Account Possible Other Future Climate Measures," Economics Working Paper Series 1110, University of St. Gallen, School of Economics and Political Science, revised Feb 2014.
    8. Michielsen, Thomas O., 2014. "Brown backstops versus the green paradox," Journal of Environmental Economics and Management, Elsevier, vol. 68(1), pages 87-110.
    9. Habermacher, Florian, 2011. "Optimal Fuel-Specific Carbon Pricing and Time Dimension of Leakage," Economics Working Paper Series 1144, University of St. Gallen, School of Economics and Political Science, revised Jan 2012.
    10. Strand, Jon, 2013. "Strategic climate policy with offsets and incomplete abatement: Carbon taxes versus cap-and-trade," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 202-218.
    11. Benjamin Jones & Michael Keen & Jon Strand, 2013. "Fiscal implications of climate change," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(1), pages 29-70, February.
    12. Zhang, Kun & Zhang, Zong-Yong & Liang, Qiao-Mei, 2017. "An empirical analysis of the green paradox in China: From the perspective of fiscal decentralization," Energy Policy, Elsevier, vol. 103(C), pages 203-211.
    13. Partha Sen, 2016. "Unilateral Emission Cuts and Carbon Leakages in a Dynamic North–South Trade Model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(1), pages 131-152, May.
    14. Frederick van der Ploeg, 2017. "Rapacious Oil Exploration in face of Regime Switches: Breakthrough Renewable Energy and Dynamic Resource Wars," Development Working Papers 415, Centro Studi Luca d'Agliano, University of Milano, revised 21 Feb 2017.
    15. Michielsen, T.O., 2011. "Brown Backstops versus the Green Paradox (Revision of CentER DP 2011-076)," Discussion Paper 2011-110, Tilburg University, Center for Economic Research.
    16. Jon Strand, 2010. "Taxes versus Cap-and-Trade in Climate Policy when only some Fuel Importers Abate," CESifo Working Paper Series 3233, CESifo Group Munich.
    17. Florian Habermacher, 2012. "Is carbon leakage really low? A critical reconsideration of the leakage concept," Chapters,in: Carbon Pricing, Growth and the Environment, chapter 16, pages 247-260 Edward Elgar Publishing.

    More about this item

    Keywords

    climate change; exhaustible resources; green paradox; carbon tax;

    JEL classification:

    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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