International capital markets, oil producers and the Green Paradox

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. 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. Terms of use: Documents inJEL-Code: D900, H200, Q310, Q380.

Balancing the carbon budget for oil: The distributive effects of alternative policies

“…They found that increasing the size of the regulating coalition tends to reduce carbon leakage; however, they did not include a backstop technology. Van der Meijden et al (2015) also use a two-period general equilibrium model and divide the world into an oil importing and an oil-exporting region to investigate the macroeconomic effects of a future carbon tax on the interest rate, the relative wealth positions of the regions, and ultimately the green paradox. They focus primarily on the complete extraction case and do not incorporate technological change.…”

Frontiers of Climate Change Economics

“…Recently, Eichner and Pethig (2011), Van der Meijden et al (2015), and van der Ploeg (2016b) have shown that general equilibrium effects are likely to mitigate weak Green Paradox effects. The reason is that the front-loading of fossil supply increases current output relative to future output, which positively affects global savings and therefore drives down the interest rate.…”

Why Finance Ministers Favor Carbon Taxes, Even If They Do Not Take Climate Change into Account

“…So far, most of the research on the conditions under which a green paradox occurs has used partial equilibrium analysis as, for example, in Edenhofer and Kalkuhl (2011), Gerlagh (2011), or van der Ploeg and Withagen (2012. Recently, this strand of research has been extended to general equilibrium models van der Meijden et al, 2014). Now, we are able to go even one step further.…”