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Unilateral Policies, Competitiveness and the ‘Green Paradox’ in a Dynamic North–South Model

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  • Partha Sen

Abstract

The effects of a unilateral cut in emissions (e.g., by Annexure 1 countries in Kyoto) are analysed in a dynamic two-country two-commodity model. If the fossil fuel is priced at marginal cost, then a unilateral cut reduces total emissions (the carbon leakage is less than 100%). But if the fuel is priced above marginal cost, then a ‘green paradox’ appears, that is, the price of the fuel will fall until its use (over time) exhausts the entire stock. Here, a unilateral policy is self-defeating and it is necessary to get binding commitments on fossil fuel use from all the countries. The production and trade implications for the participant and non-participant countries are analysed. JEL: Q4, Q50, Q54, Q56

Suggested Citation

  • Partha Sen, 2018. "Unilateral Policies, Competitiveness and the ‘Green Paradox’ in a Dynamic North–South Model," Arthaniti: Journal of Economic Theory and Practice, , vol. 17(2), pages 113-139, December.
    • Handle: RePEc:sae:artjou:v:17:y:2018:i:2:p:113-139
    DOI: 10.1177/0976747918796878
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    More about this item

    Keywords

    Carbon leakage; green paradox; Hotelling rule; quasi-linear preferences;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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