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Reassessing the Green Paradox

  • Mark Schopf


    (Faculty of Business Administration and Economics, University of Paderborn)

  • Hendrik Ritter


    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

This paper deals with possible foreign reactions to domestic carbon demand reducing policies. It differentiates between demand side and supply side reactions as well as between intra- and intertemporal shifts of greenhouse gas emissions. In our model, we integrate increasing marginal physical extraction costs of fossil fuels into the general equilibrium carbon leakage model of Eichner & Pethig (2011). The results are as follows: The conditions for the emergence of the weak green paradox are similar but somewhat tighter than those derived by Eichner & Pethig (2011). Additionally, a strong green paradox can arise in our model under supplemental constraints. That means a "green" policy measure might not only lead to an acceleration of fossil fuel extraction but to an increase in the cumulative extraction.

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Paper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 120013.

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Length: 45 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:mag:wpaper:120013
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  1. Corrado Maria & Edwin Werf, 2008. "Carbon leakage revisited: unilateral climate policy with directed technical change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(2), pages 55-74, February.
  2. Frederick Van der Ploeg & Cees A. Withagen, 2010. "Is There Really a Green Paradox?," CESifo Working Paper Series 2963, CESifo Group Munich.
  3. R. Quentin Grafton & Tom Kompas & Ngo Van Long, 2010. "Biofuels Subsidies and the Green Paradox," CESifo Working Paper Series 2960, CESifo Group Munich.
  4. Michael Hoel, 2011. "The Supply Side of CO 2 with Country Heterogeneity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(4), pages 846-865, December.
  5. Thomas Eichner & Rüdiger Pethig, 2011. "Carbon Leakage, The Green Paradox, And Perfect Future Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 767-805, 08.
  6. Michael Hoel & Svenn Jensen, 2010. "Cutting Costs of Catching Carbon. Intertemporal effects under imperfect climate policy," Discussion Papers 639, Statistics Norway, Research Department.
  7. GRAFTON, R. Quentin & KOMPAS, Tom & LONG, Ngo Van, 2011. "Substitution between Biofuels and Fossil Fuels: Is There a Green Paradox?," Cahiers de recherche 10-2011, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  8. B�rd Harstad, 2012. "Buy Coal! A Case for Supply-Side Environmental Policy," Journal of Political Economy, University of Chicago Press, vol. 120(1), pages 77 - 115.
  9. Fischer, Carolyn & Salant, Stephen, 2012. "Alternative Climate Policies and Intertemporal Emissions Leakage: Quantifying the Green Paradox," Discussion Papers dp-12-16, Resources For the Future.
  10. 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.
  11. Sinn, Hans-Werner, 2008. "Public policies against global warming: A supply side approach," Munich Reprints in Economics 19638, University of Munich, Department of Economics.
  12. Reyer Gerlagh, 2011. "Too Much Oil," CESifo Economic Studies, CESifo, vol. 57(1), pages 79-102, March.
  13. Thomas Eichner & Rüdiger Pethig, 2011. "Flattening the carbon extraction path in unilateral cost-effective action," Volkswirtschaftliche Diskussionsbeiträge 151-11, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
  14. Ulph, Alistair & Ulph, David, 1994. "The Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 857-68, Supplemen.
  15. Hoel, Michael, 2013. "Supply Side Climate Policy and the Green Paradox," Memorandum 03/2013, Oslo University, Department of Economics.
  16. 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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