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Title:Announcing climate policy: Can a green paradox arise without scarcity? PDF Logo
Authors:Smulders, Sjak
Tsur, Yacov
Zemel, Amos
Issue Date:2010
Series/Report no.:CESifo working paper: Energy and Climate Economics 3307
Abstract:Unintended consequences of a pre-announced climate policy have been studied in a variety of situations. We show that early announcement of a carbon tax gives rise to a 'Green-Paradox', in that it increases polluting emissions in the interim period (between announcement and actual implementation), irrespective of the scarcity of fossil fuels. The phenomenon 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. The paradoxical outcome is driven by consumption-saving tradeoffs facing households who seek to smooth consumption over time.
Subjects:climate policy
carbon tax
green paradox
uncertainty
JEL:Q43
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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