Simultaneous Supplies of Dirty Energy and Capacity Constrained Clean Energy

Is There a Green Paradox?

Marc Gronwald (Corresponding Author), Ngo Long, Luise Roepke

Research output: Contribution to journalArticle

2 Citations (Scopus)
5 Downloads (Pure)

Abstract

The effects of two popular second-best clean energy policies are analysed using an extended Hotelling-type resource extraction framework. This model features, first, heterogenous energy sources and, second, a capacity-constrained backstop technology. This setup allows for capturing the following two empirical observations. First, different types of energy sources are used simultaneously despite different production cost. Second, experiences from various European countries show that a further expansion of the use of climate friendly technologies faces substantial technological as well as political constraints. We use this framework to analyse if under two policy scenarios a so-called “Green Paradox” occurs. A subsidy for the clean energy as well as an expansion of the capacity of the clean energy are considered. The analysis shows that under plausible parameter values both policy measures lead to a weak Green Paradox; however a strong Green Paradox is only found for the capacity expansion scenario. In addition, the subsidy is found to be welfare enhancing while the capacity increase is welfare enhancing only if the cost of adding the capacity is sufficiently small. We also show the effects of the policies crucially depend on the initial capacity and that under certain scenarios even an “extreme” Green Paradox is found.
Original languageEnglish
Pages (from-to)47-64
Number of pages17
JournalEnvironmental and Resource Economics
Volume68
Issue number1
Early online date5 Jul 2017
DOIs
Publication statusPublished - Sep 2017

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energy
Energy policy
energy policy
production cost
Costs
climate
resource
cost
policy
Energy
Paradox
energy source
effect
subsidy
Scenarios
Energy sources
Subsidies
analysis
parameter
European countries

Keywords

  • capacity constraints
  • green paradox
  • climate change
  • Simultaneous resource use
  • Cost reversal

ASJC Scopus subject areas

  • Engineering(all)
  • Environmental Science(all)

Cite this

Simultaneous Supplies of Dirty Energy and Capacity Constrained Clean Energy : Is There a Green Paradox? / Gronwald, Marc (Corresponding Author); Long, Ngo; Roepke, Luise.

In: Environmental and Resource Economics, Vol. 68, No. 1, 09.2017, p. 47-64.

Research output: Contribution to journalArticle

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