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International capital markets, oil producers and the green paradox

Abstract:

A rapidly rising carbon tax leads to faster extraction of fossil fuels and accelerates global warming. We analyze how general equilibrium effects operating through the international capital market affect this Green Paradox. In a two-region, two-period world with identical homothetic preferences and without investment, the global interest rate falls and the Green Paradox weakens. With investment or a relatively more impatient oil-importing region, the Green Paradox may be strengthened because ...

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Publication status:
Published

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Publisher:
University of Oxford
Series:
OxCarre Papers
Publication date:
2014-01-27
Paper number:
130

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