Environmental and Resource Economics

, Volume 63, Issue 2, pp 471–504 | Cite as

Unilateral Climate Policies: Incentives and Effects

  • Karolina Ryszka
  • Cees Withagen


We analyze the effect of climate policies using a two-region partial equilibrium model of resource extraction. The regions are heterogeneous in various aspects, such as in their climate policies and resource extraction costs. We obtain analytical and numerical conditions for a Green Paradox to occur as a consequence of a unilateral increase in carbon taxation and backstop subsidy. In order to assess the welfare and climate consequences of unilateral policy changes, we calibrate the model to real world parameter values. We find that forming a ‘climate coalition’ and introducing carbon taxation even in the absence of real climate concerns is the best course of action for the largest fossil fuel-using regions.


Resource extraction Renewable resources Green Paradox Climate policies 

JEL Classification

Q30 Q31 Q37 Q38 Q50 Q54 Q58 



We gratefully acknowledge financial support from FP7-IDEAS-ERC Grant No. 269788.


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Copyright information

© Springer Science+Business Media Dordrecht 2014

Authors and Affiliations

  1. 1.Department of Spatial EconomicsVU AmsterdamAmsterdamThe Netherlands

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