Quotation 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.


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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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Publication's profile

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)
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