Second-Best Renewable Subsidies to De-carbonize the Economy: Commitment and the Green Paradox

Rezai, Armon; Ploeg, Frederick van der

doi:10.1007/s10640-016-0086-3

Cited by 42 publications

(24 citation statements)

References 57 publications

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“…An obvious one is that a rising carbon tax will in itself increase the rate of technical progress in renewable energy production and speed up the transition away from fossil fuel. To the extent that there is learning by doing, a renewable energy subsidy is called for (Rezai and Van der Ploeg, 2016b). Another one is that a rising carbon tax induces additional carbon capture and sequestration.…”

Section: Discussionmentioning

confidence: 99%

Cumulative emissions, unburnable fossil fuel, and the optimal carbon tax

Ploeg

Rezai

2017

Technological Forecasting and Social Change

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Cumulative emissions, unburnable fossil fuel, and the optimal carbon tax Article (Published) (Refereed) 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.

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Section: Discussionmentioning

confidence: 99%

Cumulative emissions, unburnable fossil fuel, and the optimal carbon tax

Ploeg

Rezai

2017

Technological Forecasting and Social Change

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“…Proof: The trend growth rate of wealth is directly derived from the equation of motion of capital (19), the portfolio decision (25) and the consumption ratio (33) for FE, and (26) with (34) for AE respectively, and taking into account that dq = 0. Direct tax uncertainty, given by the exogenous tax jump,γ, is equivalent to an unforeseeable and exogenous depreciation of physical capital.…”

Section: Propositionmentioning

confidence: 99%

Stranded Assets: How Policy Uncertainty Affects Capital, Growth, and the Environment

Bretschger

Soretz

2018

SSRN Journal

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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. Abstract Standard environmental economics prescribes policies which are optimal and implemented immediately. The paper argues that, in reality, environmental policy often deviates from the optimum and implementation is not deterministic but subject to major uncertainty and frequent change. We present a model with a stochastic policy process that affects investors' decisions and the composition of capital. We assume that pollution is reduced by private green services and public abatement. The government subsidizes green services and taxes dirty capital albeit at a rate which may become random, causing unexpected capital write-offs. Tax jumps depend on environmental degradation and the share of green services. We show how policy uncertainty affects capital valuation and how it alters individual portfolios, green services, and economic growth. Terms of use: Documents in EconStor mayJEL Classification: Q52, Q54, O10

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“…For a mathematical derivation of the social optimum for a particular climate model M, see Rezai and van der Ploeg (2017a). The emission of fossil fuel results in global warming damages to world economic production.…”

Section: S Tmentioning

confidence: 99%

“…Consequently, cumulative carbon emissions under the climate sceptic view rise to 1,094 GtC. Note that this denialist policy introduces a green paradox in the sense that fossil fuel use under the renewable energy subsidy leads to slightly higher fossil fuel use and consequently more short-run global warming than under business as usual (Rezai and van der Ploeg, 2017a). The optimal climate policies with the other temperature policies consist of both a carbon price and a renewable energy subsidy, so do not suffer from green paradox effects.…”

Section: Figure 2: Optimal Carbon Price and Renewables Subsidies For mentioning

confidence: 99%

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Climate policies under climate model uncertainty: Max-min and min-max regret

Rezai

Ploeg

2017

Energy Economics

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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. Temperature responses and optimal climate policies depend crucially on the choice of a particular climate model. To illustrate, the temperature responses to given emission reduction paths implied by the climate modules of the well-known integrated assessments models DICE, FUND and PAGE are described and compared. A dummy temperature module based on the climate denialists' view is added. Using a simple welfare-maximising growth model of the global economy, the sensitivity of the optimal carbon price, renewable energy subsidy and energy transition to each of these climate models is discussed. The paper then derives max-min, max-max and min-max regret policies to deal with this particular form of climate (model) uncertainty and with climate scepticism. The max-min or min-max regret climate policies rely on a non-sceptic view of global warming and lead to a substantial and moderate amount of caution, respectively. The max-max leads to no climate policies in line with the view of climate sceptics. Terms of use: Documents inJEL-Codes: H210, Q510, Q540.

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Second-Best Renewable Subsidies to De-carbonize the Economy: Commitment and the Green Paradox

Cited by 42 publications

References 57 publications

Cumulative emissions, unburnable fossil fuel, and the optimal carbon tax

Cumulative emissions, unburnable fossil fuel, and the optimal carbon tax

Stranded Assets: How Policy Uncertainty Affects Capital, Growth, and the Environment

Climate policies under climate model uncertainty: Max-min and min-max regret

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