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Global Warming and Endogenous Technological Change: Revisiting the Green Paradox

  • Luca Spinesi

How to control and limit climate change caused by a growing use of fossil fuels are among the most pressing policy challenges facing the world today. The green paradox argues that carbon taxes can exacerbate global warming problem because firms have the incentive to bring forward the sale of fossil fuels. This paper shows that when technological progress allows the extraction costs of fossil fuels to be reduced over time, and a positive R&D subsidy is paid, a growing carbon tax reveals a welfare maximizing policy.

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Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 068.

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Date of creation: 2012
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Handle: RePEc:oxf:oxcrwp:068
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  1. Charles I. Jones, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 495-525.
  2. Cozzi Guido, 2007. "The Arrow Effect under Competitive R&D," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-20, January.
  3. Reyer Gerlagh & Snorre Kverndokk & Knut Rosendahl, 2009. "Optimal Timing of Climate Change Policy: Interaction Between Carbon Taxes and Innovation Externalities," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(3), pages 369-390, July.
  4. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  5. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
  6. 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.
  7. Sinn, Hans-Werner, 2008. "Public policies against global warming: A supply side approach," Munich Reprints in Economics 19638, University of Munich, Department of Economics.
  8. Peretto, Pietro F, 1998. "Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
  9. Michele Boldrin & David K Levine, 2002. "The Case Against Intellectual Property," Levine's Working Paper Archive 618897000000000003, David K. Levine.
  10. Jakob B. Madsen & EPRU & FRU, 2007. "Semi-Endogenous Versus Schumpeterian Growth Models: Testing The Knowledge Production Function Using International Data," Monash Economics Working Papers 26-07, Monash University, Department of Economics.
  11. Bloom, Nick & Griffith, Rachel & Van Reenen, John, 2002. "Do R&D tax credits work? Evidence from a panel of countries 1979-1997," Journal of Public Economics, Elsevier, vol. 85(1), pages 1-31, July.
  12. Jon Strand, 2007. "Technology Treaties and Fossil-Fuels Extraction," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 129-142.
  13. Brock,W.A. & Taylor,M.S., 2004. "The Green Solow model," Working papers 16, Wisconsin Madison - Social Systems.
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