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Climate Policy and Nonrenewable ResourcesThe Green Paradox and Beyond$
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Karen Pittel, Frederick van der Ploeg, and Cees Withagen

Print publication date: 2014

Print ISBN-13: 9780262027885

Published to MIT Press Scholarship Online: January 2015

DOI: 10.7551/mitpress/9780262027885.001.0001

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Innovation and the Green Paradox

Innovation and the Green Paradox

(p.121) 6 Innovation and the Green Paradox
Climate Policy and Nonrenewable Resources

Ralph A. Winter

The MIT Press

This chapter presents a simple dynamic general equilibrium model of fossil fuel extraction when a backstop technology is available. We investigate the possibility of a Green-Paradox outcome as a result of technological progress of a backstop technology. In our chapter, we identify a new channel: technological progress influences the extraction path indirectly by a change in the equilibrium interest rate. This change induces a change in the time path of extraction in the opposite direction. We show that the indirect effect can be such strong that first-period or even aggregate extraction levels rise with technological progress.

Keywords:   Resource extraction, technological progress, general equilibrium, Green Paradox

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