For any emission trading system (ETS) with quantity-based endogenous supply of allowances, there exists a negative demand shock, e.g. induced by abatement policy, that increases aggregate supply and thus cumulative emissions. We prove this green paradox for a general model and then apply it to...

This policy note investigates whether the current level of public support to environment-friendly technologies is sufficient to allow European countries to respond to the multiple challenges posed by climate change and other environmental concerns. We first lay out the justifications for...