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(Bio-)Fuel mandating and the green paradox

Samuel J. Okullo, Frédéric Reynès and Marjan W. Hofkes

Energy Economics, 2021, vol. 95, issue C

Abstract: 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. Neglecting the interim build-up of carbon-free capacity that responds to preannounced climate policies over-estimates the green paradox. For EU-2020 and US-2022 calibrated biofuel mandating targets, simulations point to a robust 0.4–0.6% decline in premandate global crude oil supply, suggesting that concerns over the green paradox may have been overstated. Mandate designs to mitigate the green paradox are also examined. Initially mild targets that are complemented by increasingly stringent ones are more effective at curbing the green paradox than ambitious but delayed targets.

Keywords: Green paradox; Climate change; Fuel mandates; Renewable energy subsidies; Carbon taxes (search for similar items in EconPapers)
JEL-codes: C61 C72 Q28 Q35 Q42 Q54 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.eneco.2020.105014

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