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The Green Paradox is a controversial book by German economist, Hans-Werner Sinn, describing the observation that an environmental policy that becomes greener with the passage of time acts like an announced expropriation for the owners of fossil fuel resources, inducing them to accelerate resource extraction and hence to accelerate global warming.
The Green Paradox's line of reasoning starts by recognizing a fundamental, unavoidable fact: every carbon atom in the gas, coal or oil extracted 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. About a quarter of the emitted carbon will stay in the atmosphere practically forever, contributing to the greenhouse effect that causes global warming. [1] [2] [3]
Apart from 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 ]
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 and production.[ original research? ] 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 combat climate change. [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, 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] [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) 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] [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 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]
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. The prices of coal and crude oil are currently many times higher than the corresponding exploration and extraction costs combined.[ citation needed ]
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 on the demand side the independancy[ clarification needed ] for fossil fuels still pays off, while there is reduction in carbon extraction.
Hans-Werner Sinn's ideas on the green paradox have been presented in detail in a number of scientific articles, [10] [11] his 2007 Thünen Lecture [12] at the annual meeting of the Verein für Socialpolitik, his 2007 presidential address to the International Institute of Public Finance in Warwick, two working papers, [13] [14] and a German-language book, “Das Grüne Paradoxon” (2008). [15] They build on his earlier studies on supply reactions of the owners of natural resources to announced price changes. [16] [17]
A fossil fuel is a hydrocarbon-containing material such as coal, oil, and natural gas, formed naturally in the Earth's crust from the remains of dead plants and animals that is extracted and burned as a fuel. Fossil fuels may be burned to provide heat for use directly, to power engines, or to generate electricity. Some fossil fuels are refined into derivatives such as kerosene, gasoline and propane before burning. The origin of fossil fuels is the anaerobic decomposition of buried dead organisms, containing organic molecules created by photosynthesis. The conversion from these materials to high-carbon fossil fuels typically require a geological process of millions of years.
A carbon tax is a tax levied on the carbon emissions required to produce goods and services. Carbon taxes are intended to make visible the "hidden" social costs of carbon emissions, which are otherwise felt only in indirect ways like more severe weather events. In this way, they are designed to reduce greenhouse gas emissions by increasing prices of the fossil fuels that emit them when burned. This both decreases demand for goods and services that produce high emissions and incentivizes making them less carbon-intensive. In its simplest form, a carbon tax covers only CO2 emissions; however, it could also cover other greenhouse gases, such as methane or nitrous oxide, by taxing such emissions based on their CO2-equivalent global warming potential. When a hydrocarbon fuel such as coal, petroleum, or natural gas is burned, most or all of its carbon is converted to CO
2. Greenhouse gas emissions cause climate change, which damages the environment and human health. This negative externality can be reduced by taxing carbon content at any point in the product cycle. Carbon taxes are thus a type of Pigovian tax.
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The United Kingdom's Climate Change Programme was launched in November 2000 by the British government in response to its commitment agreed at the 1992 United Nations Conference on Environment and Development (UNCED). The 2000 programme was updated in March 2006 following a review launched in September 2004.
Climate change mitigation is action to limit climate change by reducing emissions of greenhouse gases or removing those gases from the atmosphere. The recent rise in global average temperature is mostly due to emissions from burning fossil fuels such as coal, oil, and natural gas. Mitigation can reduce emissions by transitioning to sustainable energy sources, conserving energy, and increasing efficiency. It is possible to remove carbon dioxide from the atmosphere by enlarging forests, restoring wetlands and using other natural and technical processes. Experts call these processes carbon sequestration. Governments and companies have pledged to reduce emissions to prevent dangerous climate change in line with international negotiations to limit warming by reducing emissions.
The politics of climate change results from different perspectives on how to respond to climate change. Global warming is driven largely by the emissions of greenhouse gases due to human economic activity, especially the burning of fossil fuels, certain industries like cement and steel production, and land use for agriculture and forestry. Since the Industrial Revolution, fossil fuels have provided the main source of energy for economic and technological development. The centrality of fossil fuels and other carbon-intensive industries has resulted in much resistance to climate friendly policy, despite widespread scientific consensus that such policy is necessary.
Business action on climate change includes a range of activities relating to climate change, and to influencing political decisions on climate change-related regulation, such as the Kyoto Protocol. Major multinationals have played and to some extent continue to play a significant role in the politics of climate change, especially in the United States, through lobbying of government and funding of climate change deniers. Business also plays a key role in the mitigation of climate change, through decisions to invest in researching and implementing new energy technologies and energy efficiency measures.
Carbon capture and storage (CCS) is a process in which a relatively pure stream of carbon dioxide (CO2) from industrial sources is separated, treated and transported to a long-term storage location. For example, the carbon dioxide stream that is to be captured can result from burning fossil fuels or biomass. Usually the CO2 is captured from large point sources, such as a chemical plant or biomass plant, and then stored in an underground geological formation. The aim is to reduce greenhouse gas emissions and thus mitigate climate change. The IPCC's most recent report on mitigating climate change describes CCS retrofits for existing power plants as one of the ways to limit emissions from the electricity sector and meet Paris Agreement goals.
Hans-Werner Sinn is a German economist who served as President of the Ifo Institute for Economic Research from 1999 to 2016. He currently serves on the German economy ministry’s advisory council. He is Professor Emeritus of Economics and Public Finance at the University of Munich.
Greenhouse gas inventories are emission inventories of greenhouse gas emissions that are developed for a variety of reasons. Scientists use inventories of natural and anthropogenic (human-caused) emissions as tools when developing atmospheric models. Policy makers use inventories to develop strategies and policies for emissions reductions and to track the progress of those policies.
Norway is a large energy producer, and one of the world's largest exporters of oil. Most of the electricity in the country is produced by hydroelectricity. Norway is one of the leading countries in the electrification of its transport sector, with the largest fleet of electric vehicles per capita in the world.
Carbon pricing is a method for nations to address climate change. The cost is applied to greenhouse gas emissions in order to encourage polluters to reduce the combustion of coal, oil and gas – the main driver of climate change. The method is widely agreed and considered to be efficient. Carbon pricing seeks to address the economic problem that emissions of CO2 and other greenhouse gases (GHG) are a negative externality – a detrimental product that is not charged for by any market.
A green-collar worker is a worker who is employed in an environmental sector of the economy. Environmental green-collar workers satisfy the demand for green development. Generally, they implement environmentally conscious design, policy, and technology to improve conservation and sustainability. Formal environmental regulations as well as informal social expectations are pushing many firms to seek professionals with expertise with environmental, energy efficiency, and clean renewable energy issues. They often seek to make their output more sustainable, and thus more favorable to public opinion, governmental regulation, and the Earth's ecology.
Carbon-based fuel is any fuel principally from the oxidation or burning of carbon. Carbon-based fuels are of two main kinds, biofuels and fossil fuels. Whereas biofuels are derived from recent-growth organic matter and are typically harvested, as with logging of forests and cutting of corn, fossil fuels are of prehistoric origin and are extracted from the ground, the principal fossil fuels being oil, coal, and natural gas.
Green growth is a concept in economic theory and policymaking used to describe paths of economic growth that are environmentally sustainable. It is based on the understanding that as long as economic growth remains a predominant goal, a decoupling of economic growth from resource use and adverse environmental impacts is required. As such, green growth is closely related to the concepts of green economy and low-carbon or sustainable development. A main driver for green growth is the transition towards sustainable energy systems. Advocates of green growth policies argue that well-implemented green policies can create opportunities for employment in sectors such as renewable energy, green agriculture, or sustainable forestry.
The economics of climate change mitigation is part of the economics of climate change related to climate change mitigation, that is actions that are designed to limit the amount of long-term climate change.
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Citizens' Climate Lobby (CCL) is an international grassroots environmental group that trains and supports volunteers to build relationships with their elected representatives in order to influence climate policy. The CCL is a registered 501(c)(4) with approximately $680,000 in revenue in the United States in 2018. Operating since 2007, the goal of CCL is to build political support across party lines to put a price on carbon, specifically a revenue-neutral carbon fee and dividend (CF&D) at the national level. CCL is supported by notable climate scientists James Hansen, Katharine Hayhoe, and Daniel Kammen. CCL's advisory board also includes former Secretary of State George P. Shultz, former US Representative Bob Inglis, actor Don Cheadle, and RESULTS founder Sam Daley-Harris.
Fossil fuel subsidies are energy subsidies on fossil fuels. They may be tax breaks on consumption, such as a lower sales tax on natural gas for residential heating; or subsidies on production, such as tax breaks on exploration for oil. Or they may be free or cheap negative externalities; such as air pollution or climate change due to burning gasoline, diesel and jet fuel. Some fossil fuel subsidies are via electricity generation, such as subsidies for coal-fired power stations.
Greenhouse gas emissions by China are the largest of any country in the world both in production and consumption terms, and stem mainly from coal burning in China, including coal-fired power stations, coal mining, and blast furnaces producing iron and steel. When measuring production-based emissions, China emitted over 14 gigatonnes (Gt) CO2eq of greenhouse gases in 2019, 27% of the world total. When measuring in consumption-based terms, which adds emissions associated with imported goods and extracts those associated with exported goods, China accounts for 13 gigatonnes (Gt) or 25% of global emissions.
