Is There Really a Green Paradox?

By F. van der ploeg, Cees Withagen. Social Science Research Network, 2012

371 citations recorded by the source corpus.

The Green Paradox states that, in the absence of a tax on CO2 emissions, subsidizing a renewable backstop such as solar or wind energy brings forward the date at which fossil fuels become exhausted and consequently global warming is aggravated. We shed light on this issue by solving a model of depletion of non-renewable fossil fuels followed by a switch to a renewable backstop, paying attention to timing of the switch and the amount of fossil fuels remaining unexploited. We show that the Green Paradox occurs for relatively expensive but clean backstops (such as solar or wind), but does not occur if the backstop is sufficiently cheap relative to marginal global warming damages (e.g., nuclear energy) as then it is attractive to leave fossil fuels unexploited and thus limit CO2 emissions. We show that, without a CO2 tax, subsidizing the backstop might enhance welfare. If the backstop is relatively dirty and cheap (e.g., coal), there might be a period with simultaneous use of the non-renewable and renewable fuels. If the backstop is very dirty compared to oil or gas (e.g., tar sands), there is no simultaneous use. The optimum policy requires an initially rising CO2 tax followed by a gradually declining CO2 tax once the dirty backstop has been introduced. We also discuss the potential for limit pricing when the non-renewable resource is owned by a monopolist.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/dacbb0670c640374d93d5c20aebb85e1205a8837

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Citations in the corpus

Is There a Green Paradox? (2010, background): “A declining price of a substitute, either because of increasing subsidies or technological improvement, can give the same e¤ect: see e.g. Strand (2007) , Gerlagh (2010) and van der Ploeg and Withagen (2010).”
Using an extended LMDI model to explore techno-economic drivers of energy-related industrial CO2 emission changes:A case study for Shanghai (China) (2016, background): “Some recent studies [62-65] noticed a so-called “green paradox” phenomenon, meaning that some designs of climate policy intended to mitigate CO2 emissions, but they might actually increase CO2 emissions, at least in the short run, because producers increase the near-term extraction and use of fossil”
An Introduction to the Green Paradox: The Unintended Consequences of Climate Policies (2015, result): “Van der Ploeg & Withagen (2012) confirm this result.”
Optimal Dynamic Carbon Taxes in a Climate–Economy Model with Distortionary Fiscal Policy (2019, background): “…studied environmental policy and carbon taxation in dynamic general equilibrium growth models with capital accumulation (e.g., Bovenberg and Smulders, 1996; Golosov, Hassler, Krusell, and Tsyvinski, 2011; van der Ploeg and Withagen, 2012; Briggs, 2012; Gerlagh and Liski, 2012; Heutel, 2012, etc.).”
Announcing Climate Policy: Can a Green Paradox Arise Without Scarcity? (2012, background): “– Tuco in The Good, the Bad and the Ugly.”
Cutting with both arms of the scissors: the economic and political case for restrictive supply-side climate policies (2018, background): “…has not been analysed is the effect on public support resulting from whether the instrument targets the supply side or the demand side 3 The circumstances in which this phenomenon might cause increased emissions are discussed in van der Ploeg and Withagen (2012) and Edenhofer and Kalkuhl (2011).”
Imperfect Environmental Policy and Polluting Emissions: The Green Paradox and Beyond (2012, methodology): “Van der Ploeg and Withagen (2012b) also study the case of a user-subsidy for the backstop, σ, and find that no green paradox occurs in response to the subsidy as the switch to the backstop is made earlier and more reserves remain unexploited.”