Climate Policy without Commitment
AbstractClimate mitigation policy should be imposed over a long period, and spur development of new technologies in order to make stabilization of green house gas concentrations economically feasible. The government may announce current and future policy packages that stimulate current R&D in climate-friendly technologies. However, once climate-friendly technologies have been developed, the government may have no incentive to implement the pre-announced future policies, that is, there may be a time inconsistency problem. We show that if the government can optimally subsidize R&D today, there is no time inconsistency problem. Thus, lack of commitment is not an argument for higher current R&D subsidies. If the o¤ered R&D subsidy is lower than the optimal subsidy, the current (sub-game perfect) climate tax should exceed the …rst-best climate tax.
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Bibliographic InfoPaper provided by Oslo University, Department of Economics in its series Memorandum with number 02/2010.
Length: 20 pages
Date of creation: 11 Aug 2010
Date of revision:
Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
More information through EDIRC
Time consistency; carbon tax; climate policy; R&D; endogenous technological change;
Other versions of this item:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-21 (All new papers)
- NEP-ENE-2010-08-21 (Energy Economics)
- NEP-ENV-2010-08-21 (Environmental Economics)
- NEP-INO-2010-08-21 (Innovation)
- NEP-MIC-2010-08-21 (Microeconomics)
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