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The time-inconsistency of alternative energy policy

  • Thierry Vignolo

    ()

    (EUI)

  • Jacques Percebois

    ()

    (Creden)

  • Agnes dArtigues

    ()

    (Creden)

Registered author(s):

    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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    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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    1. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
    2. 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.
    3. Richard Mash & Cameron Hepburn & Dieter Helm, 2004. "Time-Inconsistent Environmental Policy And Optimal Delegation," Royal Economic Society Annual Conference 2004 14, Royal Economic Society.
    4. 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.
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