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Investment Subsidies and Time-Consistent Environmental Policy

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  • Abrego, Lisandro
  • Perroni, Carlo

Abstract

We describe a model of dynamic pollution abatement choices with heterogeneous agents, where, due to the presence of a distributional objective and to the absence of incentive-compatible compensation mechanisms, the choice of a second-best level of emission taxation is time-inconsistent. In this model, we investigate whether investment subsidies can act as a substitute for policy commitment.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp533.pdf
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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 533.

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Length: 22 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:wrk:warwec:533

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Keywords: Pollution Abatement ; Emission Taxes ; Investment Subsidies;

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References

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  1. Popp, David C., 2001. "The effect of new technology on energy consumption," Resource and Energy Economics, Elsevier, vol. 23(3), pages 215-239, July.
  2. Francesco Ferrante, . "Induced Technical Change, Scientific Advance and the Efficient Control of Pollution," Discussion Papers 96/4, Department of Economics, University of York.
  3. Wolfgang HÄRDLE & J. MARRON & L. YANG, 1996. "Discussion," SFB 373 Discussion Papers 1996,65, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  4. V. V. Chari & Patrick J Kehoe, 1998. "Sustainable Plans," Levine's Working Paper Archive 600, David K. Levine.
  5. Agostini, Paola & Botteon, Michele & Carraro, Carlo, 1992. "A carbon tax to reduce CO2 emissions in Europe," Energy Economics, Elsevier, vol. 14(4), pages 279-290, October.
  6. repec:wop:humbsf:1996-65 is not listed on IDEAS
  7. Jorgenson, D.W. & Slesnick, D. & Wilcoxen, P.J., 1992. "Carbon Taxes and Economic Welfare," Harvard Institute of Economic Research Working Papers 1589, Harvard - Institute of Economic Research.
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Cited by:
  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. Marsiliani, L. & Renstrom, T.I., 1999. "Time Inconsistency in Environmental Policy: Tax Earmarking as A Commitment Solution," Discussion Paper 1999-86, Tilburg University, Center for Economic Research.
  3. Karp, Larry & Zhang, Jiangfeng, 2008. "Taxes Versus Quantities for a Stock Pollutant with Endogenous Abatement Costs and Asymmetric Information," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt84q0s8tb, Department of Agricultural & Resource Economics, UC Berkeley.
  4. Thierry Vignolo & Jacques Percebois & Agnes dArtigues, 2007. "The time-inconsistency of alternative energy policy," Economics Bulletin, AccessEcon, vol. 1(1), pages 1-7.
  5. Grischa Perino, 2008. "The Design of Permit Schemes and Environmental Innovation," Working Papers 0467, University of Heidelberg, Department of Economics, revised Jun 2008.
  6. Christophe Deissenberg & Herbert Dawid & Pavel Sevcik, 2004. "Cheap Talk, Gullibility, and Welfare in an Environmental Taxation Game," Working Papers 2004.137, Fondazione Eni Enrico Mattei.
  7. Alistair Ulph & David Ulph, 2011. "Optimal Climate Change Policies When Governments Cannot Commit," Discussion Paper Series, Department of Economics 201104, Department of Economics, University of St. Andrews.
  8. 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.

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