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.
BibTeX
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%.
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Status of publication | Published |
---|---|
Affiliation | WU |
Type of publication | Journal article |
Journal | Environmental and Resource Economics |
Citation Index | SSCI |
WU-Journal-Rating new | FIN-A, VW-C, WH-B |
Language | English |
Title | Second-best climate policies to decarbonize the economy: commitment and the Green Paradox |
Volume | 66 |
Year | 2017 |
Page from | 409 |
Page to | 434 |
Reviewed? | Y |
URL | http://link.springer.com/article/10.1007%2Fs10640-016-0086-3 |
DOI | http://dx.doi.org/10.1007/s10640-016-0086-3 |
JEL | H21; Q51; Q54 |
Associations
- People
- Rezai, Armon (Details)
- External
- van der Ploeg, Frederick (University of Oxford, United Kingdom)
- Organization
- Institute for Ecological Economics IN (Details)
- Research areas (Ă–STAT Classification 'Statistik Austria')
- 2928 Environmental economics (Details)
- 5325 Political economics (Details)
- 5334 Political economic policy (Details)
- 5335 Political economic theory (Details)
- 5341 Economic policy (Details)
- 5353 Environmental economics (Details)
- 5924 Environmental economics (Details)