Environmental and Economic effects of (current, unilateral) climate policy is examined in light of (i) the apparent exhaustibility of fossil fuels and (ii) the possibility of future technological and political climate relevant developments. Theoretical economic research tends to neglect these points or to address them in more implicit ways. Dynamic general equilibrium models explicitly allowing for points (i) and (ii) are developed. Using realistic model parameterizations, medium- and long-term projections are made, based on different scenarios notably with respect to (ii), i.e. the prospects for future technological and political climate relevant developments (such as the introduction of backstop technologies, e.g., renewable energies, or stringent global policies). Key questions are to which extent unilateral climate policies achieve the aim of global emission reductions in the medium and long run, whether climate policies may indeed sometimes be counterproductive (Green Paradox), and whether specific policy structures, such as fuel-specific carbon pricing or border tax adjustments may be economically relevant and politically feasible tools for effective and efficient climate policy.
