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Three Degrees of Green Paradox: The Weak, The Strong, and the Extreme Green Paradox

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  • Marc GRONWALD
  • Ngo Van LONG
  • Luise ROEPKE

Abstract

We show that a green paradox can be weak, or strong, or extreme. A weak green paradox arises when a green - intentioned policy measure worsens the quality of the environment at least in the near term. A strong green paradox outcome is obtained if the policy ends up causing greater cumulative environmental damages than under the business - as - usual scenario , though it may raise welfare , for example by adding productive green capacity. An extreme green paradox arises when aggregate welfare (net of environmental damages) falls as result of a poorly designed green - intentioned policy. We illustrate numerically the three degrees of green paradox using a model with a capacity - constrained green backstop technology in direct competition with fossil fuels.

Suggested Citation

  • Marc GRONWALD & Ngo Van LONG & Luise ROEPKE, 2017. "Three Degrees of Green Paradox: The Weak, The Strong, and the Extreme Green Paradox," Cahiers de recherche 02-2017, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  • Handle: RePEc:mtl:montec:02-2017
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    References listed on IDEAS

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    1. Quentin Grafton, R. & Kompas, Tom & Van Long, Ngo, 2012. "Substitution between biofuels and fossil fuels: Is there a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 328-341.
    2. 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.
    3. Hoel, Michael & Jensen, Svenn, 2012. "Cutting costs of catching carbon—Intertemporal effects under imperfect climate policy," Resource and Energy Economics, Elsevier, vol. 34(4), pages 680-695.
    4. Holland, Stephen P., 2003. "Extraction capacity and the optimal order of extraction," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 569-588, May.
    5. Jon Strand, 2007. "Technology Treaties and Fossil-Fuels Extraction," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 129-142.
    6. 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.
    7. 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, January.
    8. repec:kap:enreec:v:68:y:2017:i:1:d:10.1007_s10640-017-0151-6 is not listed on IDEAS
    9. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586, October.
    10. Svenn Jensens & Kristina Mohlin & Karen Pittel & Thomas Sterner, 2015. "An Introduction to the Green Paradox: The Unintended Consequences of Climate Policies," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 9(2), pages 246-265.
    11. van der Ploeg, Frederick & Withagen, Cees, 2012. "Too much coal, too little oil," Journal of Public Economics, Elsevier, vol. 96(1), pages 62-77.
    12. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
    13. Marc Gronwald & Ngo Long & Luise Roepke, 2017. "Simultaneous Supplies of Dirty Energy and Capacity Constrained Clean Energy: Is There a Green Paradox?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 47-64, September.
    14. Michielsen, Thomas O., 2014. "Brown backstops versus the green paradox," Journal of Environmental Economics and Management, Elsevier, vol. 68(1), pages 87-110.
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    More about this item

    Keywords

    capacity constraints; green paradox; climate change; simultaneous resource use;

    JEL classification:

    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • 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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