Brown Backstops versus the Green Paradox (Revision of CentER DP 2011-076)

T.O. Michielsen

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Abstract

Anticipated and unilateral climate policies are ineffective when fossil fuel owners respond by shifting supply intertemporally (the green paradox) or spatially (carbon leakage). These mechanisms rely crucially on the exhaustibility of fossil fuels. We analyze the effect of anticipated and unilateral climate policies on emissions in a simple model with two fossil fuels: one scarce and dirty (oil), the other abundant and dirtier (coal). We derive conditions for a ’green orthodox’: anticipated climate policy may reduce current emissions, and unilateral measures may unintentionally reduce emissions in other countries. Calibrations suggest that intertemporal carbon leakage (between -3% and 1%) is less of a concern than spatial leakage (19-39%).
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Volume2011-110
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper
Volume2011-110

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Keywords

  • carbon tax
  • green paradox
  • exhaustible resource
  • backstop
  • climate change

Cite this

Michielsen, T. O. (2011). Brown Backstops versus the Green Paradox (Revision of CentER DP 2011-076). (CentER Discussion Paper; Vol. 2011-110). Economics.