Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98422
Authors: 
Kollenbach, Gilbert
Year of Publication: 
2014
Series/Report no.: 
Volkswirtschaftliche Diskussionsbeiträge, Universität Siegen, Fachbereich Wirtschaftswissenschaften Wirtschaftsinformatik und Wirtschaftsrecht 164-14
Abstract: 
Under which conditions unilateral tightening of climate policy causes a weak or strong green paradox or even decreases social welfare has recently been studied by Hoel (2011). Hoel assumes that the costs of extracting fossil fuel are linear in output. We extend his model by allowing for progressively increasing and stock dependent extraction costs. Increasing unit costs imply the simultaneous utilization of fossil fuel and a clean backstop. This has a significant effect on the results, as the utilization of backstop by the country which tightens its climate policy always prevents a weak green paradox. As a consequence, the effect of a tighter climate policy on social welfare can be reversed. Due to the stock dependence of extraction costs the amount of fossil fuel left in situ may be increased by a tighter climate policy. This implies that social welfare may increase, even if a weak green paradox occurs.
Subjects: 
climate change
green paradox
exhaustible resources
renewable energy
JEL: 
Q41
Q42
Q54
Q58
Document Type: 
Working Paper

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