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Global Warming and Endogenous Technological Change: Revisiting the Green Paradox

Luca Spinesi ()

No 68, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: How to control and limit climate change caused by a growing use of fossil fuels are among the most pressing policy challenges facing the world today. The green paradox argues that carbon taxes can exacerbate global warming problem because firms have the incentive to bring forward the sale of fossil fuels. This paper shows that when technological progress allows the extraction costs of fossil fuels to be reduced over time, and a positive R&D subsidy is paid, a growing carbon tax reveals a welfare maximizing policy.

Keywords: Global warming; carbon taxes; technological change (search for similar items in EconPapers)
JEL-codes: O13 O30 Q54 H23 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ene and nep-env
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