This paper shifts the perspective of the recent green paradox literature towards the demand side. Based on a simple model, I show that a subsidy on input factors in a Cobb-Douglas production function may contribute substantially to postponing resource extraction into the future and, thereby, to...

Anticipated and unilateral climate policies are ineffective when fossil fuel owners respond by shifting supply intertemporally (the green paradox) or spatially (carbon leakage). These mechanisms rely crucially on the exhaustibility of fossil fuels. We analyze the effect of anticipated and...

The green paradox states that a gradually more ambitious climate policy such as a renewables subsidy or an anticipated carbon tax induces fossil fuel owners to extract more rapidly and accelerate global warming. However, if extraction becomes more costly as reserves are depleted, such policies...

In a model where firms face a continuous choice of how much to invest in environmental innovation, we show that an ever stricter environmental policy does not always lead to ever cleaner production methods and ever lower production of polluting goods. It does so when the abatement technology is...