Green Paradox

German economist Hans-Werner Sinn's book "The Green Paradox" argues that environmental policies which become stricter over time act as an announced expropriation for fossil fuel owners, prompting them to accelerate resource extraction and worsen global warming. Sinn contends that demand-reduction strategies depress world carbon prices and induce non-participating countries to consume the fuel that Kyoto Protocol nations have saved, creating a leakage effect that undermines climate goals.

The Green Paradox | Part of | Environmental economics /wiki/Environmental economics The Green Paradox is a controversial book by German economist, Hans-Werner Sinn /wiki/Hans-Werner Sinn , describing the observation that an environmental /wiki/Environmentalism policy /wiki/Public policy that becomes greener with the passage of time acts like an announced expropriation /wiki/Expropriation for the owners of /wiki/Petroleum industry fossil fuel /wiki/Fossil fuel resources, inducing them to accelerate resource extraction /wiki/Resource extraction and hence to accelerate global warming /wiki/Global warming . Main line of reasoning edit /w/index.php?title=The Green Paradox&action=edit§ion=1 The Green Paradox' s line of reasoning starts by recognizing a fundamental, unavoidable fact: every carbon /wiki/Carbon atom in the gas, coal or oil extracted /wiki/Oil extraction from the ground to be used as fuel ends up in the atmosphere, in particular if high efficiency combustion processes ensure that no part of it ends up as soot /wiki/Soot . About a quarter of the emitted carbon will stay in the atmosphere practically forever, contributing to the greenhouse effect /wiki/Greenhouse effect that causes global warming. 1 cite note-1 2 cite note-2 3 cite note-3 Apart from afforestation /wiki/Afforestation , only two things can mitigate the accumulation of carbon in the atmosphere: either less carbon is extracted from the ground, or it is injected back underground after harvesting its energy. citation needed /wiki/Wikipedia:Citation needed Environmental policy efforts, in particular European ones, move in the first direction, aiming at the promotion of alternative, CO2-free energy sources and a more efficient use of energy, both of which should cut demand for hydrocarbons. While the author, Hans-Werner Sinn in particular claims that support schemes for renewable energy sources have little effect, he overlooks government support to fossil fuel consumption /wiki/Fossil fuel subsidies and production. In OECD countries and key emerging economies such support is high, at US$160–200 billion annually, according to an OECD report. This support is said to hamper global efforts to curb emissions and original research? /wiki/Wikipedia:No original research combat climate change /wiki/Climate change mitigation . 4 cite note-4 According to Sinn green policies, by heralding a gradual tightening of policy over the coming decades, exert a stronger downward pressure on future prices than on current ones, decreasing thus the rate of capital appreciation of the fossil fuel deposits. The owners of these resources regard this development with concern and react by increasing extraction volumes, converting the proceeds into investments in the capital markets /wiki/Capital market , which offer higher yields. That is the green paradox: environmental policy slated to become greener over time acts as an announced expropriation that provokes owners to react by accelerating the rate of extraction of their fossil fuel stocks, 5 cite note-5 6 thus accelerating climate change. Countries that do not partake of the efforts to curb demand have a double advantage. They burn the carbon set free by the “green” countries leakage effect /wiki/Carbon leakage and they also burn the additional carbon extracted as a reaction to the announced and expected price cuts resulting from the gradual greening of environmental policies green paradox . 7 cite note-7 8 cite note-8 Sinn writes in his abstract that: " Demand reduction strategies simply depress the world price of carbon and induce the environmental sinners to consume what the Kyoto countries /wiki/Kyoto Protocol have economized on. Even worse, if suppliers feel threatened by a gradual greening of economic policies in the Kyoto countries that would damage their future prices, they will extract their stocks more rapidly, thus accelerating global warming." 9 cite note-9 Sinn emphasises that a condition for the green paradox is that the resource be scarce in the sense that its price will always be higher than the unit extraction and exploration costs combined. He claims that this condition is likely to be satisfied as backstop technologies will at best offer a perfect substitute for electricity, but not for fossil fuels /wiki/Fossil fuels . The prices of coal and crude oil are currently many times higher than the corresponding exploration and extraction costs combined. citation needed /wiki/Wikipedia:Citation needed Practicable solutions edit /w/index.php?title=The Green Paradox&action=edit§ion=2 An effective climate policy must perforce focus on the hitherto neglected supply side of the carbon market in addition to the demand side. The ways proposed as practicable by Sinn include levying a withholding tax on the capital gains on the financial investments of fossil fuel resource owners, or the establishment of a seamless global emissions trading system that would effectively put a cap on worldwide fossil fuel consumption, thereby achieving the desired reduction in carbon extraction rates. A suggestion for a solution might also be to pay suppliers for the destruction of fossil fuels or transform them into raw material not fuel , thus making sure that independence from fossil fuels on the demand side still pays off, while there is reduction in carbon extraction. clarification needed /wiki/Wikipedia:Please clarify Works on the subject edit /w/index.php?title=The Green Paradox&action=edit§ion=3 Hans-Werner Sinn's ideas on the green paradox have been presented in detail in a number of scientific articles, 10 cite note-10 11 his 2007 Thünen Lecture at the annual meeting of the 12 cite note-12 Verein für Socialpolitik /wiki/Verein f%C3%BCr Socialpolitik , his 2007 presidential address to the International Institute of Public Finance in Warwick, two working papers, 13 cite note-13 and a German-language book, “Das Grüne Paradoxon” 2008 . 14 cite note-14 They build on his earlier studies on supply reactions of the owners of natural resources to announced price changes. 15 cite note-15 16 cite note-16 17 cite note-17 See also edit /w/index.php?title=The Green Paradox&action=edit§ion=4 Jevons paradox /wiki/Jevons paradox – Efficiency leads to increased demand Notes and references edit /w/index.php?title=The Green Paradox&action=edit§ion=5 Archer, D. 2005 . ^ cite ref-1 "Fate of Fossil Fuel CO https://doi.org/10.1029%2F2004jc002625 .2in Geologic Time" Journal of Geophysical Research . 110 C9 : 5–11. Bibcode /wiki/Bibcode identifier : 2005JGRC..110.9S05A https://ui.adsabs.harvard.edu/abs/2005JGRC..110.9S05A . doi /wiki/Doi identifier : 10.1029/2004jc002625 https://doi.org/10.1029%2F2004jc002625 .Archer, D.; Brovkin, V. 2006 . "Millennial Atmospheric Lifetime of Anthropogenic CO ^ cite ref-2 2". Climate Change, Mimeo .Hoos, G.; Voss, R.; Hasselmann, K.; Meier-Reimer, E.; Joos, F. 2001 . ^ cite ref-3 "A Nonlinear Impulse Response Model of the Coupled Carbon Cycle-Climate System NICCS " https://boris.unibe.ch/158496/ .. Climate Dynamics /wiki/Climate Dynamics 18 3–4 : 189–202. Bibcode /wiki/Bibcode identifier : 2001ClDy...18..189H https://ui.adsabs.harvard.edu/abs/2001ClDy...18..189H . doi /wiki/Doi identifier : 10.1007/s003820100170 https://doi.org/10.1007%2Fs003820100170 . hdl /wiki/Hdl identifier : 11858/00-001M-0000-0012-02FC-3 https://hdl.handle.net/11858%2F00-001M-0000-0012-02FC-3 . S2CID /wiki/S2CID identifier 129396838 https://api.semanticscholar.org/CorpusID:129396838 . ^ cite ref-4 "Support to fossil fuels remains high and the time is ripe for change - OECD" http://www.oecd.org/environment/support-to-fossil-fuels-remains-high-and-the-time-is-ripe-for-change.htm . www.oecd.org . Retrieved 2018-06-18.Long, N. V. 1975 . "Resource Extraction under the Uncertainty about Possible Nationalization". ^ cite ref-5 . Journal of Economic Theory /wiki/Journal of Economic Theory 10 1 : 42–53. doi /wiki/Doi identifier : 10.1016/0022-0531 75 90060-5 https://doi.org/10.1016%2F0022-0531%2875%2990060-5 .Konrad, K. A.; Olson, T. E.; Schöb, R. 1994 . "Resource Extraction and the Threat of Possible Expropriation: The Role of Swiss Bank Accounts". ^ cite ref-6 . Journal of Environmental Economics and Management /wiki/Journal of Environmental Economics and Management 26 2 : 149–162. Bibcode /wiki/Bibcode identifier : 1994JEEM...26..149K https://ui.adsabs.harvard.edu/abs/1994JEEM...26..149K . doi /wiki/Doi identifier : 10.1006/jeem.1994.1009 https://doi.org/10.1006%2Fjeem.1994.1009 .Felder, S.; Rutherford, T. F. 1993 . "Unilateral CO ^ cite ref-7 2Reductions and Carbon Leakage: The Consequences of International Trade in Oil and Basic Materials". Journal of Environmental Economics and Management . 25 2 : 162–176. doi /wiki/Doi identifier : 10.1006/jeem.1993.1040 https://doi.org/10.1006%2Fjeem.1993.1040 .Burniaux, J.-M.; Martins, J. Oliveira 2000 . "Carbon Emission Leakages: A General Equilibrium View". ^ cite ref-8 OECD Working Paper No. 242 . SSRN /wiki/SSRN identifier 228535 https://papers.ssrn.com/sol3/papers.cfm?abstract id=228535 .Sinn, H. W. 2008 . ^ cite ref-9 "Public policies against global warming" https://web.archive.org/web/20141023173210/http://www.cesifo-group.de/portal/page/portal/ifoContent/N/rts/rts-mitarbeiter/IFOMITARBSINNCV/CVSinnPDF/CVSinnPDFrefjournals2007/ITAX-hws-2008.pdf PDF . International Tax and Public Finance . 15 4 : 360–394. doi /wiki/Doi identifier : 10.1007/s10797-008-9082-z https://doi.org/10.1007%2Fs10797-008-9082-z . hdl /wiki/Hdl identifier : 10.1007/s10797-008-9082-z https://hdl.handle.net/10.1007%2Fs10797-008-9082-z . S2CID /wiki/S2CID identifier 54687950 https://api.semanticscholar.org/CorpusID:54687950 . Archived from the original http://www.cesifo-group.de/portal/page/portal/ifoContent/N/rts/rts-mitarbeiter/IFOMITARBSINNCV/CVSinnPDF/CVSinnPDFrefjournals2007/ITAX-hws-2008.pdf PDF on 2014-10-23. Retrieved 2011-01-11.“Public Policies against Global Warming: A Supply Side Approach”, ^ cite ref-10 International Tax and Public Finance 15, 2008, p. 360–394.H.-W. Sinn, “Das grüne Paradoxon: Warum man das Angebot bei der Klimapolitik nicht vergessen darf”, ^ cite ref-11 Perspektiven der Wirtschaftspolitik 9, 2008, p. 109–142. ^ cite ref-12 "CESifo Group Munich" https://web.archive.org/web/20210227100827/http://www.cesifo-group.de/link/ ifovideo/thuenen-vorlesung-1007.htm . Archived from the original http://www.cesifo-group.de/link/ ifovideo/thuenen-vorlesung-1007.htm on February 27, 2021.H.-W. Sinn, Public Policies against Global Warming, ^ cite ref-13 CESifo Working Paper No. 2087 http://www.cesifo-group.de/portal/page/portal/ifoHome/b-publ/b3publwp/ wp abstract?p file id=14563 Archived https://web.archive.org/web/20120217030508/http://www.cesifo-group.de/portal/page/portal/ifoHome/b-publ/b3publwp/ wp abstract?p file id=14563 2012-02-17 at the Wayback Machine /wiki/Wayback Machine , August 2007H.-W. Sinn, Pareto Optimality in the Extraction of Fossil Fuels and the Greenhouse Effect: A Note, ^ cite ref-14 CESifo Working Paper No. 2083 http://www.cesifo-group.de/portal/page/portal/ifoHome/b-publ/b3publwp/ wp abstract?p file id=14562 Archived https://web.archive.org/web/20181218010740/http://www.cesifo-group.de/ifoHome?p file id=14562 2018-12-18 at the Wayback Machine /wiki/Wayback Machine , August 2007 ^ cite ref-15 Das grüne Paradoxon - Plädoyer für eine illusionsfreie Klimapolitik https://archive.today/20120723120226/http://www.cesifo-group.de/link/ publsinnparadoxon , Econ: Berlin, 2008, 480 pages.Sinn, H.-W. 1982 . ^ cite ref-16 "Absatzsteuern, Ölförderung und das Allmendeproblem" https://web.archive.org/web/20210227102021/http://www.cesifo-group.de/link/Sinn Abs Oel Allmend 1982.pdf Sales Taxes, Oil Extraction and the Common Pool Problem PDF . In Siebert, H. ed. . Reaktionen auf Energiepreisänderungen . Frankfurt and Bern: Lang. pp. 83–103. Archived from the original http://www.cesifo-group.de/link/Sinn Abs Oel Allmend 1982.pdf PDF on 2021-02-27. Retrieved 2010-07-01.Long, N. V.; Sinn, H.-W. 1985 . ^ cite ref-17 "Surprise Price Shifts, Tax Changes and the Supply Behaviour of Resource Extracting Firms" https://web.archive.org/web/20210227102719/http://www.cesifo-group.de/link/Sinn Surpr Price Shift AEP 1985.pdf PDF . Australian Economic Papers . 24 45 : 278–289. doi /wiki/Doi identifier : 10.1111/j.1467-8454.1985.tb00116.x https://doi.org/10.1111%2Fj.1467-8454.1985.tb00116.x . S2CID /wiki/S2CID identifier 154165341 https://api.semanticscholar.org/CorpusID:154165341 . Archived from the original http://www.cesifo-group.de/link/Sinn Surpr Price Shift AEP 1985.pdf PDF on February 27, 2021. - Sinn 2008 . Das grüne Paradoxon: Plädoyer für eine illusionsfreie Klimapolitik in German . Berlin: Econ. ISBN /wiki/ISBN identifier 978-3-430-20062-2 /wiki/Special:BookSources/978-3-430-20062-2 . OCLC /wiki/OCLC identifier 276147108 https://search.worldcat.org/oclc/276147108 . External links edit /w/index.php?title=The Green Paradox&action=edit§ion=6