## February 28, 2010

### Biofuels Subsidies and the Green Paradox

by R. Quentin Grafton, Tom Kompas and Ngo Van Long

- This paper develops sufficient conditions under which the Weak Green Paradox may (and may not) hold in terms of subsidies for biofuel production such that the supply-side responses by fossil fuel producers may more than offset the substitution to biofuels. Analytical results are derived and numerical simulations show that, under a wide range of parameter values, biofuel subsidies will increase the rate of extraction of fossil fuels in the short and medium term, and possibly bring climate-change damages closer to the present.

Grafton, R.Q. T. Kompas and N. Van Long (2010). "Biofuels Subsidies and the Green Paradox." CESifo Working Paper No. 2960, Feb 2010.