Biofuel Mandating and the Green Paradox
59 Pages Posted: 13 Jun 2016 Last revised: 13 Nov 2019
Date Written: November 11, 2019
Well-intended preannounced carbon mitigation policies can lead to adverse impacts such as the green paradox. This paper examines conditions impacting the prevalence of this phenomenon, when suppliers of carbon-free energy, similarly to carbon suppliers, can anticipate the implementation of preannounced carbon regulation. Ignoring the response of carbon-free suppliers to preannounced climate policies overestimates the green paradox. For EU-2020 and US-2022 calibrated biofuel mandating targets, simulations point to a robust 0.4-0.6 percent decline in premandate global crude oil supply, suggesting that concerns over the green paradox may have been overstated. Mandate design to mitigate the green paradox is also discussed.
Keywords: Green Paradox, Climate Change, Peak Oil, Biofuel Mandates, Unconventional Crude Oil
JEL Classification: C61, C7, H25, H32, Q28, Q35, Q42, Q58
Suggested Citation: Suggested Citation