• Energy Research
• NL close

Anticipated and unilateral climate policies are ineffective when fossil fuel owners respond by shifting supply intertemporally (the green paradox) or spatially (carbon leakage). These mechanisms rely crucially on the exhaustibility of fossil fuels. We analyze the effect of anticipated and unilateral climate policies on emissions in a simple model with two fossil fuels: one scarce and dirty (oil), the other abundant and dirtier (coal). We derive conditions for a ’green orthodox’: anticipated climate policy may reduce current emissions, and unilateral measures may unintentionally reduce emissions in other countries. Calibrations suggest that intertemporal carbon leakage (between -3% and 1%) is less of a concern than spatial leakage (19-39%).

Well-intended policies aimed at reducing greenhouse gas emissions may have unintended undesirable consequences. Recently, a large literature has emerged showing that such a `green paradox' may occur in response to particular policies. We review this literature and identify four different imperfect policy approaches that may induce a green paradox. We discuss under what conditions a green paradox may occur and highlight avenues for future research

This paper analyzes the advantages and implications of the implementation of a European tax on carbon dioxide emissions as an own resource of the European Union. In contrast to a harmonized tax, which would only have distributive effects within each member state, a tax collected at European scale would also have important distributive effects among different countries. These effects would also depend on the use of tax revenues. The paper investigates the distributive effects among the member states of three tax models: a pure CO2

We estimate the long-run effect of a broad-based carbon tax on energy consumption by using a new and unique cross-sectional dataset of effective energy tax rates of OECD countries. Our instrumental variables estimations, which exploit the positive correlation between the tax rates of neighboring countries, indicate a much higher effectiveness for carbon taxation than those from ordinary least square estimations. The validity of our identification strategy is consistent with the theories of strategic policy interaction in the presence of immobile tax bases. Our results show that a one euro increase in energy taxes reduces carbon emissions from fossil fuel consumption by 0.73 percent in the long run.

A stylised analytical framework is used to show how the global carbon tax and the amount of untapped fossil fuel can be calculated from a simple rule given estimates of society's rate of time impatience and intergenerational inequality aversion, the extraction cost technology, the rate of technical progress in renewable energy and the future trend rate of economic growth. The predictions of the simple framework are tested in a calibrated numerical and more complex version of the integrated assessment model (IAM). This IAM makes use of the Oxford carbon cycle of Allen et al. (2009), which differs from DICE, FUND and PAGE in that cumulative emissions are the key driving force of changes in temperature. We highlight the importance of the speed and direction of technological change for the energy transition and how time impatience, intergenerational inequality aversion and expected trend growth affect the time paths of the optimal global carbon tax and the optimal amount of fossil fuel reserves to leave untapped. We also compare these with the adverse global warming trajectories that occur if no policy actions are taken.

The shipping industry accounts for a significant share in global GHG emissions. Especially since Business as Usual (BaU) scenario studies project that the emissions due to shipping could increase by 50 [%] to 250 [%] in the period to 2050 (IMO, 2015), shipowners face a potential regulatory threat. Major climate regulations for shipping already entered into force, and a range of possible instruments may be applied going forward. Possible instruments are among others, tightened EEDI limits, port discounts, ETS, or a Carbon Tax. Besides the risk of direct regulation, there is also a risk of being indirectly impacted by energy and/or climate regulation in other sectors. The direct and indirect regulations can adversely impact the operations, cashflow, and economic value of enterprises of existing shipowners and charterers of ships. Shipowners and financiers that are unaware of these developments, or that do not take timely mitigating actions, may potentially face considerable financial losses. This research investigated and ranked the level of Carbon Risk for shipowners across several sub sectors. The objective of the research was to: define, measure, and reveal the level of Carbon Risk for shipowners and to assess mitigating strategies as part of the assessment of the bank’s exposure to Carbon Risk. Typical core drivers, factors, and dependencies have been studied from literature in order to come up with an effective approach to capture the threat of Carbon Risk. As a result, a Carbon Risk framework is been developed, showing (inter)dependencies between all Carbon Risk factors. By developing the framework, this research contributed to the current understanding of the (inter)dependencies between Carbon Risk factors. In addition to the framework, typical Carbon Risks have been identified for the shipping industry. This research focuses on Structural Risk. A Carbon Tax is used as a proxy for Regulatory Risk and demand substitution (i.e. a 20 [%] reduction of cargo) is used as proxy for Substitution Risk. By ...

The historical increase in emissions is for one-fourth attributable to the growth of emissions per person, whereas three-fourths are due to population growth. This striking evidence is not represented in the majority of climate-economic studies, which mostly neglect the environmental consequences of individuals’ reproductive decisions. In this paper, we study the interactions between climate change and population dynamics. We develop an analytical model of endogenous fertility and embed it in a calibrated climate-economy model. Our results present family planning as an integral part of climate policies and quantify the costs of neglecting the interaction.

In the presence of implementation lags, announced Pigouvian taxation leads to fossil fuel prices that are too low from society’s perspective. This results in excessive emissions and reduced incentives for green innovation. Such effects are compounded by the presence of pre-existing subsidies to fossil fuel use. We show that the intertemporal resource tax path may need to be modified to optimally take into account the perverse incentives from policy lags and pre-existing policies. We find that it might be optimal to subsidize, rather than tax resource extraction at the instant of implementation.

A rapidly rising carbon tax leads to faster extraction of fossil fuels and accelerates global warming. We analyze how general equilibrium effects operating through the international capital market affect this Green Paradox. In a two-region, two-period world with identical homothetic preferences and without investment, the global interest rate falls and the Green Paradox weakens. With investment or a relatively more impatient oil-importing region, the Green Paradox may be strengthened because the future oil demand function shifts downward or because the interest rate rises. If the oil-importing region is very much more patient than the oil-exporting region, the Green Paradox may be reversed but in our calibrated model the effects are tiny. With exploration and endogenous initial oil reserves, a future carbon tax lowers cumulative oil extraction in partial equilibrium. If the boost to current oil extraction is weakened, strengthened or reversed in general equilibrium, so is the fall in cumulative extraction. A partial and general equilibrium welfare analysis of a future carbon tax, both for full and partial exhaustion, is given. The effects of stock-dependent extraction costs are separately discussed in an Appendix.