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The Green Paradox: A Supply-side View of the Climate Problem

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  • Hans-Werner Sinn

Abstract

Why have policies aimed at reducing the demand for carbon not succeeded in slowing down global carbon extraction and CO2 emissions, and why have carbon prices failed to increase over the last three decades? This comment argues that this is because of the Green Paradox, i.e. – (the anticipation of sales by resource owners who try to pre-empt the destruction of their markets by green policies.) – Reviewing some of the conditions under which strong and weak versions of the Green Paradox may emerge, it is argued that there is little hope that green replacement technologies will impose hard price constraints that would keep long-run extraction within a fixed carbon budget and that, therefore, even strong versions of the paradox cannot easily be avoided.

Suggested Citation

  • Hans-Werner Sinn, 2015. "The Green Paradox: A Supply-side View of the Climate Problem," CESifo Working Paper Series 5385, CESifo.
    • Handle: RePEc:ces:ceswps:_5385
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    References listed on IDEAS

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    1. R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 29-45.
    2. Long, Ngo Van & Sinn, Hans-Werner, 1985. "Surprise Price Shifts, Tax Changes and the Supply Behaviour of Resource Extracting Firms," Australian Economic Papers, Wiley Blackwell, vol. 24(45), pages 278-289, December.
    3. Hans‐Werner Sinn, 2008. "Das grüne Paradoxon: Warum man das Angebot bei der Klimapolitik nicht vergessen darf," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 9(s1), pages 109-142, May.
    4. Hans-Werner Sinn, 2007. "Pareto Optimality in the Extraction of Fossil Fuels and the Greenhouse Effect: A Note," NBER Working Papers 13453, National Bureau of Economic Research, Inc.
    5. Sinn, Hans-Werner, 2012. "The Green Paradox: A Supply-Side Approach to Global Warming," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262016680, December.
    6. Frederick van der Ploeg & Cees Withagen, 2015. "Global Warming and the Green Paradox: A Review of Adverse Effects of Climate Policies," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 9(2), pages 285-303.
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    Citations

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    Cited by:

    1. Peña, Juan Ignacio & Rodríguez, Rosa, 2019. "Are EU's Climate and Energy Package 20-20-20 targets achievable and compatible? Evidence from the impact of renewables on electricity prices," Energy, Elsevier, vol. 183(C), pages 477-486.
    2. Geoffrey Heal, 2022. "Economic Aspects of the Energy Transition," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(1), pages 5-21, September.
    3. Alain Quinet, 2019. "What Value Do We Attach to Climate Action?," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 510-511-5, pages 165-179.
    4. Martin Zapf & Hermann Pengg & Christian Weindl, 2019. "How to Comply with the Paris Agreement Temperature Goal: Global Carbon Pricing According to Carbon Budgets," Energies, MDPI, vol. 12(15), pages 1-20, August.
    5. Juan Ignacio Pe~na & Rosa Rodriguez, 2022. "Are EU Climate and Energy Package 20-20-20 targets achievable and compatible? Evidence from the impact of renewables on electricity prices," Papers 2202.01720, arXiv.org.
    6. Berger, Johannes & Strohner, Ludwig & Thomas, Tobias, 2020. "Klimainstrumente im Vergleich: Herausforderungen in Hinblick auf ökologische, ökonomische und soziale Nachhaltigkeit," Policy Notes 39, EcoAustria – Institute for Economic Research.
    7. Dominique Bureau & Alain Quinet & Katheline Schubert, 2020. "Cost-Benefit Analysis For Climate Action," Policy Papers 2020.03, FAERE - French Association of Environmental and Resource Economists.
    8. Parton, Lee C. & Dundas, Steven J., 2020. "Fall in the sea, eventually? A green paradox in climate adaptation for coastal housing markets," Journal of Environmental Economics and Management, Elsevier, vol. 104(C).
    9. Frederick Ploeg, 2023. "Fiscal Costs of Climate Policies: Role of Tax, Political, and Behavioural Distortions," De Economist, Springer, vol. 171(2), pages 119-137, June.
    10. Baldwin, Elizabeth & Cai, Yongyang & Kuralbayeva, Karlygash, 2020. "To build or not to build? Capital stocks and climate policy∗," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    11. Marie-Catherine Riekhof & Johannes Bröcker, 2017. "Does The Adverse Announcement Effect Of Climate Policy Matter? — A Dynamic General Equilibrium Analysis," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 8(02), pages 1-34, May.
    12. Garth Day & Creina Day, 2022. "The supply-side climate policy of decreasing fossil fuel tax profiles: can subsidized reserves induce a green paradox?," Climatic Change, Springer, vol. 173(3), pages 1-19, August.
    13. Peszko,Grzegorz & Van Der Mensbrugghe,Dominique & Golub,Alexander Alexandrovich, 2020. "Diversification and Cooperation Strategies in a Decarbonizing World," Policy Research Working Paper Series 9315, The World Bank.

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    More about this item

    Keywords

    carbon; environmentalism; back stop; oil prices;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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