Announcing climate policy

Can a Green Paradox arise without scarcity?

Sjak A. Smulders, Y. Tsur, A. Zemel

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Unintended consequences of a pre-announced climate policy are studied within a framework that allows for competition between polluting and clean energy sources. We show that early announcement of a carbon tax gives rise to a “green-paradox,” in that it increases emissions in the interim period (between announcement and actual implementation), irrespective of the scarcity of fossil fuels. The paradoxical outcome is driven by consumption-saving tradeoffs facing households who seek to smooth consumption over time and holds both when the announced implementation date is taken as a credible threat and when households are skeptical about the (political) will or capability of the government to implement the policy as announced.
Original languageEnglish
Pages (from-to)364-376
JournalJournal of Environmental Economics and Management
Volume64
Issue number3
DOIs
Publication statusPublished - 2012

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environmental policy
pollution tax
fossil fuel
consumption
household
Announcement
Household
Paradox
Climate policy
Scarcity
policy
energy source
Unintended consequences
Trade-offs
Threat
Energy sources
Government
Fossil fuels
Carbon tax

Cite this

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Announcing climate policy : Can a Green Paradox arise without scarcity? / Smulders, Sjak A.; Tsur, Y.; Zemel, A.

In: Journal of Environmental Economics and Management, Vol. 64, No. 3, 2012, p. 364-376.

Research output: Contribution to journalArticleScientificpeer-review

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AU - Tsur, Y.

AU - Zemel, A.

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AB - Unintended consequences of a pre-announced climate policy are studied within a framework that allows for competition between polluting and clean energy sources. We show that early announcement of a carbon tax gives rise to a “green-paradox,” in that it increases emissions in the interim period (between announcement and actual implementation), irrespective of the scarcity of fossil fuels. The paradoxical outcome is driven by consumption-saving tradeoffs facing households who seek to smooth consumption over time and holds both when the announced implementation date is taken as a credible threat and when households are skeptical about the (political) will or capability of the government to implement the policy as announced.

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DO - 10.1016/j.jeem.2012.02.007

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