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Too good to be true? Time-inconsistent renewable energy policies

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  • Chiappinelli, Olga
  • May, Nils

Abstract

The transition to low-carbon economies requires massive investments into renewable energies, which are commonly supported through regulatory frameworks. Yet, governments can have incentives – and the ability – to deviate from previously announced support policies once those investments have been made, which can deter investments. We analyze a renewable energy dynamic regulation game and derive under what conditions governments have incentives to deviate from their commitments. We then consider the effects of different support policy regimes and deployment targets on compliance. Last, with a numerical application of the model, we explain why Spain conducted retrospective changes in the period 2010–2013 whereas Germany stuck to its commitments.

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  • Chiappinelli, Olga & May, Nils, 2022. "Too good to be true? Time-inconsistent renewable energy policies," Energy Economics, Elsevier, vol. 112(C).
    • Handle: RePEc:eee:eneeco:v:112:y:2022:i:c:s0140988322002614
    DOI: 10.1016/j.eneco.2022.106102
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    2. Jahanger, Atif & Zubair Chishti, Muhammad & Chukwuma Onwe, Joshua & Awan, Ashar, 2022. "How far renewable energy and globalization are useful to mitigate the environment in Mexico? Application of QARDL and spectral causality analysis," Renewable Energy, Elsevier, vol. 201(P1), pages 514-525.
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    More about this item

    Keywords

    Time-inconsistency; Dynamic regulation; Targets; Renewable energy policy; Renewable energy investments;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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