Cumulative Carbon Emissions and the Green Paradox

Posted: 11 Oct 2013

Date Written: June 2013

Abstract

The green paradox states that a gradually more ambitious climate policy such as a renewables subsidy or an anticipated carbon tax induces fossil fuel owners to extract more rapidly and accelerate global warming. However, if extraction becomes more costly as reserves are depleted, such policies also shorten the fossil fuel era, induce more fossil fuel to be left in the earth, and thus curb cumulative carbon emissions. These consequences are relevant, as global warming depends primarily on cumulative emissions. There is no green paradox for a specific carbon tax that rises at less than the market rate of interest. Because this is the case for the growth of the optimal carbon tax, the green paradox is a temporary second-best phenomenon. There is also a green paradox if there is a chance of a breakthrough in renewables technology occurring at some random future date. However, there will also be less investment in opening up fossil fuel deposits, and thus cumulative carbon emission will be curbed.

Suggested Citation

van der Ploeg, Frederick, Cumulative Carbon Emissions and the Green Paradox (June 2013). Annual Review of Resource Economics, Vol. 5, Issue 1, pp. 281-300, 2013, Available at SSRN: https://ssrn.com/abstract=2339091 or http://dx.doi.org/10.1146/annurev-resource-091912-151930

Frederick Van der Ploeg (Contact Author)

University of Oxford ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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