Rezai, Armon, van der Ploeg, Frederick. 2017. Second-best climate policies to decarbonize the economy: commitment and the Green Paradox. Environmental and Resource Economics 66, 409-434.

RIS

@ARTICLE{Rezai2017,
title = {Second-best climate policies to decarbonize the economy: commitment and the Green Paradox},
author = {Armon Rezai and Frederick van der Ploeg},
year = {2017},
doi = {http://dx.doi.org/10.1007/s10640-016-0086-3},
url = {http://link.springer.com/article/10.1007%2Fs10640-016-0086-3},
volume = {66},
language = {EN},
pages = {409-434},
journal = {Environmental and Resource Economics},
abstract = {Climate change must deal with two market failures: global warming and learning by doing in renewable energy production. The first-best policy consists of an aggressive renewables subsidy in the near term and a gradually rising and falling carbon tax. Given that global carbon taxes remain elusive, policy makers might have to rely on a second-best subsidy only. With credible commitment the second-best subsidy is higher than the social benefit of learning to cut the transition time and peak warming close to first-best levels at the cost of higher fossil fuel use in the short run (weak Green Paradox). Without commitment the second-best subsidy is set to the social benefit of learning. It generates smaller weak Green Paradox effects, but the transition to the carbon-free takes longer and cumulative carbon emissions are higher. Under first best and second best with pre-commitment peak warming is 2.1–2.3 ∘C, under second best without commitment 3.5 ∘C, and without any policy 5.1 ∘C above pre-industrial levels. Not being able to commit yields a welfare loss of 95% of initial GDP compared to first best. Being able to commit brings this figure down to 7%.},
}