Carbon Leakage, the Green Paradox and Perfect Future Markets

32 Pages Posted: 11 Feb 2009

See all articles by Thomas Eichner

Thomas Eichner

University of Siegen - School of Economic Disciplines

Rudiger Pethig

University of Siegen - School of Economic Disciplines; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: February 1, 2009

Abstract

Policies of lowering carbon demand may aggravate rather than alleviate climate change (green paradox). In a two-period three-country general equilibrium model with finite endowment of fossil fuel one country enforces an emissions cap in the first or second period. When that cap is tightened the extent of carbon leakage depends on the interaction of various parameters and elasticities. Conditions for the green paradox are specified. All determinants of carbon leakage resulting from tightening the first-period cap work in opposite direction when the second-period cap is tightened. Tightening the second-period cap does not necessarily lead to the green paradox.

Keywords: carbon leakage, green paradox, emissions cap

JEL Classification: H22, Q32, Q54

Suggested Citation

Eichner, Thomas and Pethig, Rudiger, Carbon Leakage, the Green Paradox and Perfect Future Markets (February 1, 2009). CESifo Working Paper Series No. 2542. Available at SSRN: https://ssrn.com/abstract=1340394

Thomas Eichner (Contact Author)

University of Siegen - School of Economic Disciplines ( email )

Hoelderlinstrasse 3
57068 Siegen
Germany

Rudiger Pethig

University of Siegen - School of Economic Disciplines ( email )

Hoelderlinstrasse 3
57068 Siegen
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
220
Abstract Views
1,273
rank
136,001
PlumX Metrics