Climate Policy and Nonrenewable Resources: The Green Paradox and Beyond

Too rapidly rising carbon taxes or the introduction of subsidies for renewable energies induce owners of fossil fuel reserves to increase their extraction rates for fear of their reserves becoming worthless. Fossil fuel use is thus brought forward. The resulting acceleration of global warming and counter-productivity of well-intended climate policy has been coined the Green Paradox by Hans-Werner Sinn and is the intertemporal analogue of the often discussed problem of carbon leakage in the global economy. How robust are these insights? The answer is it depends. These policies typically induce ... More

Too rapidly rising carbon taxes or the introduction of subsidies for renewable energies induce owners of fossil fuel reserves to increase their extraction rates for fear of their reserves becoming worthless. Fossil fuel use is thus brought forward. The resulting acceleration of global warming and counter-productivity of well-intended climate policy has been coined the Green Paradox by Hans-Werner Sinn and is the intertemporal analogue of the often discussed problem of carbon leakage in the global economy. How robust are these insights? The answer is it depends. These policies typically induce fossil fuel owners to also leave more reserves unexploited in the crust of the earth, which limits the total stock of carbon in the atmosphere and thus curbs global warming ultimately. This volume presents a range of studies which extends the basic analysis to allow for clean energy alternatives such as solar and wind power, dirty energy alternative such as coal and the tar sands, the different elasticities of substitution between all these energy sources, and the intricate strategic issues between different countries on the globe. This offers deeper and more nuanced insights into the Green Paradox with some refreshing policy perspectives.