Biofuels Subsidies and the Green Paradox
42 Pages Posted: 28 Feb 2010
Date Written: February 2010
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: Suggested Citation