The Green Paradox and Learning-by-doing in the Renewable Energy Sector

The research examines the 'green paradox'—where climate policies may inadvertently accelerate fossil fuel extraction—within a two-period model that incorporates learning-by-doing (LBD) in the renewable energy sector. The authors find that while a present carbon tax consistently reduces current fossil fuel use, the impact of renewable energy subsidies is ambiguous and depends on the strength of the LBD effect. Specifically, large LBD effects can trigger the green paradox by significantly reducing future demand for fossil fuels, thereby incentivizing resource owners to increase extraction in the present. The paper concludes that a carbon tax is the most reliable tool for reducing immediate CO2 emissions, suggesting that tax revenues should only be used to fund subsidies if the LBD effect is small.

• A carbon tax implemented on present fossil fuels consistently reduces their current use, whereas a tax implemented in the future can trigger the green paradox by bringing forward extraction.
• The effect of renewable energy subsidies on current fossil fuel demand is ambiguous and determined by the magnitude of the learning-by-doing (LBD) effect.
• Large LBD effects can lead to the green paradox because significant cost reductions in clean energy lower future demand for conventional energy, which incentivizes resource owners to extract more fossil fuels today.
• In a budget-neutral scheme where carbon tax revenues finance renewable subsidies, the effect on fossil fuel use is ambiguous and depends on the LBD effect; for small LBD, the reduction in current fossil fuel use is greater than with taxation alone.
• To minimize near-term GHG emissions, the authors recommend implementing a present carbon tax and avoiding future tax increases, while only using tax revenues for subsidies if the LBD effect is small.

APA

Nachtigall, D., & Rübbelke, D. (2013). The Green Paradox and Learning-by-doing in the Renewable Energy Sector. Basque Centre for Climate Change. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201305060930221447386809.pdf

Chicago

Nachtigall, Daniel, and Dirk Rübbelke. The Green Paradox and Learning-by-doing in the Renewable Energy Sector. Basque Centre for Climate Change, 2013. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201305060930221447386809.pdf.

Wikipedia

{{cite report |last1=Nachtigall |first1=Daniel |last2=Rübbelke |first2=Dirk |title=The Green Paradox and Learning-by-doing in the Renewable Energy Sector |publisher=Basque Centre for Climate Change |date=April 2013 |url=https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201305060930221447386809.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nachtigall2013green, author = {Nachtigall, Daniel and Rübbelke, Dirk}, title = {{The Green Paradox and Learning-by-doing in the Renewable Energy Sector}}, institution = {Basque Centre for Climate Change}, year = {2013}, month = apr, url = {https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201305060930221447386809.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }