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Brown Backstops Versus the Green Paradox

  • Thomas Michielsen
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    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 (eg oil), the other abundant and dirtier (eg 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.

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    File URL: http://www.oxcarre.ox.ac.uk/files/OxCarreRP2013108.pdf
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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 108.

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    Date of creation: 2013
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    Handle: RePEc:oxf:oxcrwp:108
    Contact details of provider: Postal: Manor Road, Oxford, OX1 3UQ
    Web page: http://www.oxcarre.ox.ac.uk/
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