https://pure.iiasa.ac.at/id/eprint/13988 2021-08-27T17:41:39Z info:eu-repo/semantics/descriptiveMetadata https://pure.iiasa.ac.at/id/eprint/13988/ Second-Best Renewable Subsidies to De-carbonize the Economy: Commitment and the Green Paradox Rezai, A. van der Ploeg, F. Climate change must deal with two market failures: global warming and learning by doing in renewable energy production. The first-best policy consists of an aggressive renewables subsidy in the near term and a gradually rising and falling carbon tax. Given that global carbon taxes remain elusive, policy makers might have to rely on a second-best subsidy only. With credible commitment the second-best subsidy is higher than the social benefit of learning to cut the transition time and peak warming close to first-best levels at the cost of higher fossil fuel use in the short run (weak Green Paradox). Without commitment the second-best subsidy is set to the social benefit of learning. It generates smaller weak Green Paradox effects, but the transition to the carbon-free takes longer and cumulative carbon emissions are higher. Under first best and second best with pre-commitment peak warming is 2.1–2.3 ∘C, under second best without commitment 3.5 ∘C, and without any policy 5.1 ∘C above pre-industrial levels. Not being able to commit yields a welfare loss of 95% of initial GDP compared to first best. Being able to commit brings this figure down to 7%. Springer Netherlands 2017-03 Article PeerReviewed text en cc_by https://pure.iiasa.ac.at/id/eprint/13988/1/s10640-016-0086-3.pdf Rezai, A. <https://pure.iiasa.ac.at/view/iiasa/248.html> & van der Ploeg, F. (2017). Second-Best Renewable Subsidies to De-carbonize the Economy: Commitment and the Green Paradox. Environmental and Resource Economics 66 (3) 409-434. 10.1007/s10640-016-0086-3 <https://doi.org/10.1007/s10640-016-0086-3>. 10.1007/s10640-016-0086-3 10.1007/s10640-016-0086-3 10.1007/s10640-016-0086-3 info:eu-repo/semantics/objectFile info:eu-repo/semantics/humanStartPage