Biofuels Subsidies and the Green Paradox
R. Quentin Grafton
Australian National University (ANU) - Centre for Resource and Environmental Studies (CRES); Australian National University (ANU) - Crawford School of Economics and Government
Australian National University (ANU) - Crawford School of Public Policy
Ngo Van Long
McGill University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
CESifo Working Paper Series No. 2960
This paper develops sufficient conditions under which the Weak Green Paradox may (and may not) hold in terms of subsidies for biofuel production such that the supply-side responses by fossil fuel producers may more than offset the substitution to biofuels. Analytical results are derived and numerical simulations show that, under a wide range of parameter values, biofuel subsidies will increase the rate of extraction of fossil fuels in the short and medium term, and possibly bring climate-change damages closer to the present.
Number of Pages in PDF File: 42
Keywords: biofuels subsidies, the Green Paradox
JEL Classification: Q54, Q42, Q30working papers series
Date posted: February 28, 2010
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