Unilateral climate policies: Incentives and effects

K.A. Ryszka, C.A.A.M. Withagen

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We analyze the effect of climate policies using a two-region partial equilibrium model of resource extraction. The regions are heterogeneous in various aspects, such as in their climate policies and resource extraction costs. We obtain analytical and numerical conditions for a Green Paradox to occur as a consequence of a unilateral increase in carbon taxation and backstop subsidy. In order to assess the welfare and climate consequences of unilateral policy changes, we calibrate the model to real world parameter values. We find that forming a ‘climate coalition’ and introducing carbon taxation even in the absence of real climate concerns is the best course of action for the largest fossil fuel-using regions.
Original languageEnglish
Pages (from-to)471-504
JournalEnvironmental and Resource Economics
Volume63
Issue number2
DOIs
Publication statusPublished - 2016

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