Is a green paradox spectre haunting international climate change laws and conventions?

• Author: Partain, Roy Andrew
• Position: I. Introduction through IV. Classes of Green Paradox Models, p. 61-103 - The California-Quebec Adventure: Linking Cap and Trade as a Path to Global Climate Action

1. INTRODUCTION II. COULD THE UNFCCC WORSEN CLIMATE CHANGE? III. RESEARCH QUESTION AND METHODOLOGY A. Models of Exhaustible Resources and Green Policies B. Structure of the Study IV. CLASSES OF GREEN PARADOX MODELS A. Sinn's Carbon Tax Green Paradox Models 1. Anthropogenic Climate Change Created by Market Failures 2. Rising Carbon Taxes Could Induce Green Paradox Effects B. Models of Rising Carbon Taxes C. Models of Backstop Technologies D. Models of Delayed Implementation After Green Policy Announcements E. Models of International Carbon Leakage F. Michielsen's Integrated Model of Intertemporal and Interspatial Leakages V. ECONOMIC MODELS OF EXHAUSTIBLE RESOURCES A. Background of Hotelling's Models B. Hotelling's Model: Optimal Depletion Pathways C. Hotelling's Models: Caveats and Perspectives 1. Assumption of Free Market/Monopoly Conditions 2. Complete Information on Reserves and Depletion Schedules 3. Conflagration of Full Depletion and Profit Maximization 4. Hotelling's Rule Part I--Value of Resource 5. Hotelling's Rule Part II--Flexible Schedule of Extraction 6. Rising Extraction Costs 7. Eighth--Secure Property Rights D. Dasgupta and Heal's 1974 Green Energy Backstop Model E. Heal's 1976 Dirty Energy Backstop Model VI. CONCLUSIONS I. INTRODUCTION

   Could the United Nations Framework Convention on Climate Change (UNFCCC),), and green laws in general, increase greenhouse gas emissions, and thus worsen the threats and risks of climate change? Many economists examining international responses to climate change fear that green laws may backfire under certain circumstances; a phenomenon known as a "green paradox. (1) In his controversial book, The Green Paradox, German economist Hans-Werner Sinn goes so far as to characterize this backfire as inevitable. (2) Must legal researchers and climate change activists fear that their legal policy efforts will lead to worsening climate conditions? Is there truly no way to avert this green paradox crisis?

   Sinn explains the Green Paradox first by referencing human psychology. (3) He claims, "Resource owners aren't stupid ... Arab oil sheikhs, Russian gas oligarchs, and coal barons all have realized that a revolution in the world's energy mix is underway." (4) As a result, he claims that resource owners are selling off more and more fossil fuel resources while legislative efforts to make alternative energy more cost-effective and popular are increasing. (5) This potential green paradox has been echoed by many other economists (6) and surely if there are mechanisms within climate change laws and conventions that give rise to green paradox results, legal researchers, legislators, and climate change policymakers should take caution and consider revamping the existing framework of international climate change conventions and associated domestic policies.

   However, most of these authors rely on two economic models originally developed for studying exhaustible resources: the Hotelling and Dasgupta Heal models. (7) If these models are unreliable for green paradox research, then caution should be taken before economists begin to unravel the decades of negotiations that have enabled the existing frameworks.

   The research of these circumstances requires the combination of legal requirements and economic models. This present study reviews the concern that certain economic models might be problematic in resolving the first question due to certain assumptions built into those models when they were originally designed for other research purposes. However, the analysis presented is intended for an audience of legal researchers; mathematical materials are minimized in the presentation and the evidence is presented in a format familiar to lawyers. Hopefully this research will better enable other legal researchers to engage in broader research on the potential impacts of green paradox models on future climate change laws and conventions.

2. COULD THE UNFCCC WORSEN CLIMATE CHANGE?

   The scientific community broadly holds that the cause of global climate change is primarily anthropogenic. (8) To assist in the governance of the dangers posed by global climate change, almost every nation in the world has joined the United Nations Framework Convention on Climate Change ("UNFCCC"); (9) many nations have also agreed to the UNFCCC's Kyoto Protocol. (10) While legislators and policy makers sought to prevent the onset of worsening of climate change by the adoption of this convention and subsequent domestic enactments of similar laws, Sinn raised a concern that these green-intended conventions and laws might in fact give rise to paradoxical results that would worsen and accelerate global climate change. (11) The existence, and potential inevitability, of these green paradoxes is of grave concern to policy makers and legislators concerned with preventing climate change.

   Anthropogenic climate change is driven primarily by the emission of greenhouse gases, and consequently, the adopted international conventions and enacted domestic legislations have focused on greenhouse gas emissions. The UNFCCC has a regulatory goal to achieve the "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system." (12) Nations that have joined under the UNFCCC are required to "formulate, implement, publish, and regularly update ... programs containing measures to mitigate climate change." (13) Those measures are required to focus on reducing emissions and providing for sinks of greenhouse gases. (14) Under the UNFCCC, the regulated greenhouse gases are: (i) carbon dioxide, (ii) methane, (iii) nitrous oxide, (iv) hydrofluorocabons, (v) perfluorocarbons, and (vi) sulphur hexafluoride. (15)

   The Kyoto Protocol spelled out specific obligatory mitigation strategies. (16) Parties are directed, inter alia, to: (i) enhance energy efficiency; (17) (ii) provide for greenhouse gas sinks and carbon sequestration; (18) (iii) research, promote, develop and increase the use of new and renewable energy sources; (19) (iv) reduce the various supports and subsidies that enable greenhouse gas emissions; (20) and to (v) limit or reduce greenhouse gas emissions. (21) Further, the Kyoto Protocol mandates that certain emission targets be reached by specific deadlines; a similar element is absent in the UNFCCC. (22)

   However, as Sinn and others have demonstrated, (23) in certain circumstances, it appears that such legal policies could backfire and thus increase greenhouse gas emissions. Given the importance to prevent anthropogenic climate change, it thus becomes critical for legislators and policy makers to understand if these green paradox concerns are substantial.

   This study attempts to reduce and placate some of those concerns. It attempts to review a large body of theoretical green paradox models to reveal that certain underlying modeling assumptions substantially and materially limit their applicability to the research of green paradox phenomena. As such, this article reveals that most of the existing models that find the existence of green paradox events are unreliable for legal researchers and policy makers.

   This paper finds that when certain economic models are relied upon in green paradox research, there are underlying mechanisms that prevent law and policy makers from obtaining clear guidance. As such, increased efforts should be made to promote alternative and more diverse models of green policy impacts on exhaustible resources to better provide the necessary clarity for legislators.

3. RESEARCH QUESTION AND METHODOLOGY

   1. Models of Exhaustible Resources and Green Policies

      This study takes note that a substantial number of emergent green paradox models are based on a small set of economic models originally developed for studying exhaustible resources. (24) Those models, known as Hotelling and Dasgupta Heal models, contain modeling assumptions that drive certain behaviors within the models. When those models are utilized to research the effects of green laws and conventions, green paradox results have been observed.

      Hotelling first developed his early model on depletion rates in between the two world wars; the policy concerns were questionable pricing by resource owners and allegations of over-extraction and wastage of exhaustible resources. (25) He attempted to provide a framework to resolve those and other related policy questions. While his work is seen as seminal today, it was not as commonly cited in its early years. It is worth noting that his models were not exclusively energy resource related, but applicable to any exhaustible resource, such as diamonds or precious metals. (26)

      In the 1970s, Dasgupta and Heal expanded on Hotelling's model by focusing on depletable energy resources and adding a choice of an alternative energy source. (27) In this manner, they facilitated the energy policy discussions of replacing one fossil fuel with another or with renewable energy resources. However, despite the focus on energy resources and the potential to adopt an energy alternative, their models remained mathematically similar to Hotelling's model and inherited many of the same assumptions.

      The developing awareness of anthropogenic climate change led to the adoption of the United Nations Framework Convention on Climate Change (UNFCCC) and its Kyoto Protocol during the 1990s. (28) In 2008, Sinn took notice that under certain conditions, the legal requirements of green energy policies, when evaluated within a Hotelling-based model, could lead to increased emissions of anthropogenic greenhouse gases. (29) Sinn's forecasted effects, of increased greenhouse gas emissions due to green energy policies, have been labeled as 'green paradox' phenomena. (30) Since his seminal observations, many researchers have developed other economic models of potential green paradox phenomena. (31)

      While the potential causes of green paradox phenomena appear diverse...