Announcing climate policy: Can a green paradox arise without scarcity?

Sjak Smulders, Yacov Tsur, Amos Zemel

Research output: Contribution to journalArticlepeer-review

118 Scopus citations

Abstract

Unintended consequences of a pre-announced climate policy are studied within a framework that allows for competition between polluting and clean energy sources. We show that early announcement of a carbon tax gives rise to a "green-paradox," in that it increases emissions in the interim period (between announcement and actual implementation), irrespective of the scarcity of fossil fuels. The paradoxical outcome is driven by consumption-saving tradeoffs facing households who seek to smooth consumption over time and holds both when the announced implementation date is taken as a credible threat and when households are skeptical about the (political) will or capability of the government to implement the policy as announced.

Original languageEnglish
Pages (from-to)364-376
Number of pages13
JournalJournal of Environmental Economics and Management
Volume64
Issue number3
DOIs
StatePublished - 1 Nov 2012

Keywords

  • Carbon tax
  • Climate policy
  • Green paradox

ASJC Scopus subject areas

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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