When do increasing carbon taxes accelerate global warming? A note on the green paradox
The "green paradox" by Hans-Werner Sinn suggests that increasing resource taxes accelerate global warming because resource owners increase near-term extraction in fear of higher future taxation. In this note we show that this effect does only occur for the specific set of carbon taxes that increase at a rate higher than the effective discount rate of the resource owners. We calculate a critical initial value for the carbon tax that leads to a decreased cumulative consumption over the entire (infinite) time horizon. Applying our formal findings to carbon taxes for several mitigation targets, we conclude that there is a low risk of a green paradox in case the regulator implements and commits to a permanently mal-adjusted tax. This remaining risk can be avoided by emissions trading scheme as suggested by Sinn--as long as the emission caps are set appropriately and the intertemporal permit market works correctly.
Year of publication: |
2011
|
---|---|
Authors: | Edenhofer, Ottmar ; Kalkuhl, Matthias |
Published in: |
Energy Policy. - Elsevier, ISSN 0301-4215. - Vol. 39.2011, 4, p. 2208-2212
|
Publisher: |
Elsevier |
Keywords: | Climate policy Resource taxes Supply-side dynamics |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Prices vs. quantities and the intertemporal dynamics of the climate rent
Kalkuhl, Matthias, (2010)
-
Learning or lock-in: Optimal technology policies to support mitigation
Kalkuhl, Matthias, (2011)
-
Renewable energy subsidies: Second-best policy or fatal aberration for mitigation?
Kalkuhl, Matthias, (2011)
- More ...