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Brown backstops versus the green paradox

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  • Michielsen, Thomas O.

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. The model can also be used to analyze spatial carbon leakage. Calibrations suggest that intertemporal carbon leakage (from 0% to 8%) is a relatively minor concern.

Suggested Citation

  • Michielsen, Thomas O., 2014. "Brown backstops versus the green paradox," Journal of Environmental Economics and Management, Elsevier, vol. 68(1), pages 87-110.
    • Handle: RePEc:eee:jeeman:v:68:y:2014:i:1:p:87-110
    DOI: 10.1016/j.jeem.2014.04.004
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    More about this item

    Keywords

    Carbon tax; Green paradox; Exhaustible resource; Backstop; Climate change;
    All these keywords.

    JEL classification:

    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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