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The Green Paradox
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Book by economist Hans-Werner Sinn
Part of a series aboutEnvironmental economics<br>Carbon price
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Value of Earth
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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.
Main line of reasoning<br>[edit]
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...