The Green Paradox Under Imperfect Substitutability between Clean and Dirty Fuels
The Green Paradox Under Imperfect Substitutability between Clean and Dirty Fuels
This chapter shows that a technological change that increases marginally the degree of substitutability of non-fossil fuels for fossil fuels may cause fossil fuels producers to anticipate lower demand in the future, and to react by increasing current extraction, leading to higher near-term emissions and accelerating climate change damages. Such a Green Paradox outcome is more likely to occur if the existing degree of substitutability is moderate or high. In fact, if the current degree of substitutability is near zero, then there will be no Green Paradox outcome associated with a marginal increase in substitutability.
Keywords: Substitutability, Green Paradox, climate change, technological change, emissions
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