Advanced Search
MyIDEAS: Login

Time-Inconsistent Environmental Policy And Optimal Delegation

Contents:

Author Info

  • Richard Mash
  • Cameron Hepburn
  • Dieter Helm

Abstract

Time consistency problems can arise when environmental taxes are employed to encourage firms to take irreversible abatement decisions. Setting a high carbon tax, for instance, would induce firms to invest in low-carbon technology, yet once investment has occurred the government can then reduce the carbon tax to better achieve other objectives; lower energy prices, redistribution, and electoral success. The resulting time inconsistency discourages firms from investing in the first place. We propose an institutional solution to this problem, adapted from the monetary policy literature; the commitment outcome can be achieved through delegation to an `environmental policymaker`, akin to a conservative central banker.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://repec.org/res2004/MashHepburnHelm.pdf
File Function: full text
Download Restriction: no

Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2004 with number 14.

as in new window
Length:
Date of creation: 17 Sep 2004
Date of revision:
Handle: RePEc:ecj:ac2004:14

Contact details of provider:
Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Email:
Web page: http://www.res.org.uk/society/annualconf.asp
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. 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.
  2. James M. Poterba, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," NBER Working Papers 2833, National Bureau of Economic Research, Inc.
  3. Svensson, Lars E O, 1995. "Optimal Inflation Targets, 'Conservative' Central Banks, and Linear Inflation Contracts," CEPR Discussion Papers 1249, C.E.P.R. Discussion Papers.
  4. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
  5. Lisandro Abrego & Carlo Perroni, 2002. "Investment subsidies and Time-Consistent Environmental Policy," Oxford Economic Papers, Oxford University Press, vol. 54(4), pages 617-635, October.
  6. Biglaiser, Gary & Horowitz, John K & Quiggin, John, 1995. "Dynamic Pollution Regulation," Journal of Regulatory Economics, Springer, vol. 8(1), pages 33-44, July.
  7. Charles L. Ballard & Don Fullerton, 1992. "Distortionary Taxes and the Provision of Public Goods," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 117-131, Summer.
  8. 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.
  9. Stiglitz, Joseph E & Dasgupta, P, 1971. "Differential Taxation, Public Goods and Economic Efficiency," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 151-74, April.
  10. Metcalf, Gilbert E., 1999. "A Distributional Analysis of Green Tax Reforms," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 655-82, December.
  11. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  12. Gersbach, Hans & Glazer, Amihai, 1999. "Markets and Regulatory Hold-Up Problems," Journal of Environmental Economics and Management, Elsevier, vol. 37(2), pages 151-164, March.
  13. Browning, Edgar K, 1976. "The Marginal Cost of Public Funds," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 283-98, April.
  14. Marsiliani, Laura & Renstrom, Thomas I, 2000. "Time Inconsistency in Environmental Policy: Tax Earmarking as a Commitment Solution," Economic Journal, Royal Economic Society, vol. 110(462), pages C123-38, March.
  15. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-62, May.
  16. Dieter Helm & Cameron Hepburn & Richard Mash, 2003. "Credible Carbon Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 438-450.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Raphael Calel, 2011. "Market-based instruments and technology choices: a synthesis," Grantham Research Institute on Climate Change and the Environment Working Papers 57, Grantham Research Institute on Climate Change and the Environment.
  2. Cameron Hepburn, 2006. "Regulation by Prices, Quantities, or Both: A Review of Instrument Choice," Oxford Review of Economic Policy, Oxford University Press, vol. 22(2), pages 226-247, Summer.
  3. Agnes d'Artigues & Jacques Percebois & Thierry Vignolo, 2007. "The Time-Inconsistency of Alternative Energy Policy," Economics Working Papers ECO2007/32, European University Institute.
  4. Joerg Breitscheidel & Hans Gersbach, 2005. "Self-Financing Environmental Mechanisms," CESifo Working Paper Series 1528, CESifo Group Munich.
  5. Thierry Vignolo & Jacques Percebois & Agnes dArtigues, 2007. "The time-inconsistency of alternative energy policy," Economics Bulletin, AccessEcon, vol. 1(1), pages 1-7.
  6. repec:ebl:ecbull:v:1:y:2007:i:1:p:1-7 is not listed on IDEAS

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ecj:ac2004:14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.