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Biofuel Mandating and the Green Paradox

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  • Okullo, Samuel

    (Tilburg University, School of Economics and Management)

  • Reynes, F.
  • Hofkes, M.

Abstract

Well-intended preannounced carbon mitigation policies can lead to adverse impacts such as the green paradox. This paper examines conditions impacting the prevalence of this phenomenon, when suppliers of carbon-free energy, similarly to carbon suppliers, can anticipate the implementation of preannounced carbon regulation. Neglecting the interim build-up of carbon-free capacity that responds to preannounced climate policies over-estimates the green paradox. For EU-2020 and US-2022 calibrated biofuel mandating targets, simulations point to a robust 0.4–0.6% decline in premandate global crude oil supply, suggesting that concerns over the green paradox may have been overstated. Mandate designs to mitigate the green paradox are also examined. Initially mild targets that are complemented by increasingly stringent ones are more effective at curbing the green paradox than ambitious but delayed targets.
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  • Okullo, Samuel & Reynes, F. & Hofkes, M., 2016. "Biofuel Mandating and the Green Paradox," Other publications TiSEM 2ef0304e-8645-42f7-9146-7, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:2ef0304e-8645-42f7-9146-765488467b09
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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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