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Brown Backstops Versus the Green Paradox

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  • Thomas Michielsen

Abstract

Anticipated climate policies are ineffective when fossil fuel owners respond by shifting supply intertemporally (the green paradox). This mechanism relies crucially on the exhaustibility of fossil fuels. We analyze the effect of anticipated climate policies on emissions in a simple model with two fossil fuels: one scarce and dirty (e.g. oil), the other abundant and dirtier (e.g. coal). We derive conditions for a ’green orthodox’: anticipated climate policies may reduce current emissions. Calibrations suggest that intertemporal carbon leakage (from -22% to 13%) is a relatively minor concern.

Suggested Citation

  • Thomas Michielsen, 2013. "Brown Backstops Versus the Green Paradox," OxCarre Working Papers 108, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    • Handle: RePEc:oxf:oxcrwp:108
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    Keywords

    carbon tax; green paradox; exhaustible resource; backstop; climate change;
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