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The time-inconsistency of alternative energy policy

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  • Thierry Vignolo

    ()
    (EUI)

  • Jacques Percebois

    ()
    (Creden)

  • Agnes dArtigues

    ()
    (Creden)

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    Abstract

    Time-inconsistency can arise when a government attempts to convince private sector to use a particular alternative energy (gas, green electricity...) rather than petroleum products. By introducing taxes and feed-in prices, a government would encourage firms and households to switch to an alternative energy rather than use petroleum products. However, even if a government is in favor of increasing alternative energy consumption, it can benefit from considerable financial resources resulting from petroleum product consumption. As a result of these conflicting issues, the private sector may not find the alternative energy policy credible, which prevents the government to implement a socially efficient policy.

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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume1/EB-07A10001A.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 1 (2007)
    Issue (Month): 1 ()
    Pages: 1-7

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    Handle: RePEc:ebl:ecbull:eb-07a10001

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    Related research

    Keywords: Time-inconsistency Energy policy Tax expenditures;

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    1. Dieter Helm & Cameron Hepburn & Richard Mash, 2003. "Time Inconsistent Environmental Policy and Optimal Delegation," Economics Series Working Papers 175, University of Oxford, Department of Economics.
    2. Abrego, Lisandro & Perroni, Carlo, 1999. "Investment Subsidies and Time-Consistent Environmental Policy," The Warwick Economics Research Paper Series (TWERPS) 533, University of Warwick, Department of Economics.
    3. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
    4. Robert J. Barro & David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
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