Arbeitspapier
Second-Best Renewable Subsidies to De-Carbonize the Economy: Commitment and the Green Paradox
Climate change must deal with two market failures: global warming and learning by doing in renewable use. The first-best policy consists of an aggressive renewables subsidy in the near term and a gradually rising and falling carbon tax. Given that global carbon taxes remain elusive, policy makers have to use a second-best subsidy. In case of credible commitment, the second-best subsidy is set higher than the social benefit of learning. It allows the transition time and peak warming close to first-best levels at the cost of higher fossil fuel use (weak Green Paradox). If policy makers cannot commit, the second-best subsidy is set to the social benefit of learning. It generates smaller weak Green Paradox effects, but the transition to the carbon-free takes longer and cumulative carbon emissions are higher. Under first-best and second best with pre-commitment peak warming is 2.1 - 2.3 °C, under second best without commitment 3.5°C, and without any policy temperature 5.1°C above pre-industrial levels. Not being able to commit yields a welfare loss of 95% of initial GDP compared to first best. Being able to commit brings this figure down to 7%.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 5721
- Klassifikation
-
Wirtschaft
Taxation and Subsidies: Efficiency; Optimal Taxation
Valuation of Environmental Effects
Climate; Natural Disasters and Their Management; Global Warming
- Thema
-
first-best and second-best policy
commitment
Markov-perfect
Ramsey growth
carbon tax
renewables subsidy
learning by doing
directed technical change
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Rezai, Armon
der Ploeg, Frederick Van
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2016
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Rezai, Armon
- der Ploeg, Frederick Van
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2016
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