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The Green Paradox and Learning-by-doing in the Renewable Energy Sector

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  • Daniel Nachtigall
  • Dirk Rübbelke
Abstract
We investigate the effect of climate policies on fossil fuel use in the presence of a clean alternative technology that exhibits learning-by-doing. In a two-period framework, the costs of clean and regenerative energy in the second period are decreasing with the amount of this energy produced in the first one. While a carbon tax on present fossil fuels always reduces the use of the conventional energy source, the effect of a subsidy for regenerative energy is ambiguous and depends on the size of the learning effect. For small learning effects, a subsidy reduces the present use of fossil fuels since their substitute becomes comparatively cheap. However, for larger learning effects, a subsidy leads to the green paradox as the cost reduction in the clean energy sector reduces the future demand for conventional energy and brings forward extraction. We conclude that the best way to reduce present CO2 emissions is the implementation of a carbon tax. If the learning effect is small, the carbon-tax revenues should additionally finance the subsidy for the renewable energy.

Suggested Citation

  • Daniel Nachtigall & Dirk Rübbelke, 2013. "The Green Paradox and Learning-by-doing in the Renewable Energy Sector," Working Papers 2013-09, BC3.
    • Handle: RePEc:bcc:wpaper:2013-09
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    2. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    3. Espinola-Arredondo, Ana & Muñoz-García, Félix & Duah, Isaac, 2019. "Anticipatory effects of taxation in the commons: When do taxes work, and when do they fail?," Ecological Economics, Elsevier, vol. 166(C), pages 1-1.
    4. Wang, Huiqing & Wei, Weixian, 2020. "Coordinating technological progress and environmental regulation in CO2 mitigation: The optimal levels for OECD countries & emerging economies," Energy Economics, Elsevier, vol. 87(C).
    5. Alena Miftakhova & Clément Renoir, 2021. "Economic Growth and Equity in Anticipation of Climate Policy," CER-ETH Economics working paper series 21/355, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    6. van der Meijden, Gerard & van der Ploeg, Frederick & Withagen, Cees, 2015. "International capital markets, oil producers and the Green Paradox," European Economic Review, Elsevier, vol. 76(C), pages 275-297.
    7. Lancker, Kira & Quaas, Martin F., 2019. "Increasing marginal costs and the efficiency of differentiated feed-in tariffs," Energy Economics, Elsevier, vol. 83(C), pages 104-118.
    8. Yuan, Yongna & Duan, Hongbo & Tsvetanov, Tsvetan G., 2020. "Synergizing China's energy and carbon mitigation goals: General equilibrium modeling and policy assessment," Energy Economics, Elsevier, vol. 89(C).
    9. Mark Schopf, 2016. "Unilateral Supply Side Policies and the Green Paradox," Working Papers Dissertations 28, Paderborn University, Faculty of Business Administration and Economics.
    10. Marie-Catherine Riekhof & Johannes Bröcker, 2017. "Does The Adverse Announcement Effect Of Climate Policy Matter? — A Dynamic General Equilibrium Analysis," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 8(02), pages 1-34, May.
    11. Hattendorff, Christian, 2014. "Natural resources, demand for external finance and financial development," Discussion Papers 2014/33, Free University Berlin, School of Business & Economics.
    12. Christian Beermann, 2015. "Climate Policy and the Intertemporal Supply of Fossil Resources," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 62.
    13. Kosugi, Takanobu, 2023. "Learning rate matters: Reexamining optimal power expansion planning with endogenized technological experience curves," Energy, Elsevier, vol. 283(C).

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    More about this item

    Keywords

    climate change; exhaustible resources; regenerative energy; green paradox;
    All these keywords.

    JEL classification:

    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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