Biofuels Subsidies and the Green Paradox

42 Pages Posted: 28 Feb 2010

See all articles by Quentin Grafton

Quentin Grafton

The Australian National University

Tom Kompas

University of Melbourne

Ngo Van Long

McGill University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: February 2010

Abstract

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.

Keywords: biofuels subsidies, the Green Paradox

JEL Classification: Q54, Q42, Q30

Suggested Citation

Grafton, Quentin and Kompas, Tom and Van Long, Ngo, Biofuels Subsidies and the Green Paradox (February 2010). CESifo Working Paper Series No. 2960, Available at SSRN: https://ssrn.com/abstract=1559747

Quentin Grafton

The Australian National University ( email )

Crawford School (Bldg 132)
The ANU
Acton, Canberra, Australian Capital Territory 2601
Australia

HOME PAGE: http://https://crawford.anu.edu.au/people/academic/quentin-grafton

Tom Kompas

University of Melbourne ( email )

Parkville, Victoria
Melbourne, Victoria 3010
Australia

Ngo Van Long (Contact Author)

McGill University - Department of Economics ( email )

855 Sherbrooke Street West
Montreal, QC H3A 2T7
Canada
514-398-4850 (Phone)
514-398-4938 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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