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Energy efficiency policy in a non-cooperative world

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  • Barla, Philippe
  • Proost, Stef

Abstract

In this paper, we explore energy efficiency policies in the presence of a global environmental problem and international cost interdependency associated with R&D activities. We develop a simple model with two regions where the cost of an appliance in one region depends upon the level of energy efficiency in that region and the level of R&D activities by the appliance industry. In our model, the cooperative outcome can be decentralized by imposing a tax on energy. However, we show that when regions do not cooperate, they have an incentive to adopt additional instruments to increase energy efficiency. The reason is that the lack of cooperation leads to under-taxation of the environmental externality which in turn creates an incentive to try to reduce emissions produced abroad. We illustrate this phenomenon with the Californian vehicle greenhouse gas standards.

Suggested Citation

  • Barla, Philippe & Proost, Stef, 2012. "Energy efficiency policy in a non-cooperative world," Energy Economics, Elsevier, vol. 34(6), pages 2209-2215.
  • Handle: RePEc:eee:eneeco:v:34:y:2012:i:6:p:2209-2215
    DOI: 10.1016/j.eneco.2012.03.015
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    References listed on IDEAS

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    Cited by:

    1. Proost, Stef & Van Dender, Kurt, 2012. "Energy and environment challenges in the transport sector," Economics of Transportation, Elsevier, vol. 1(1), pages 77-87.
    2. Mahlia, T.M.I. & Tohno, S. & Tezuka, T., 2013. "International experience on incentive program in support of fuel economy standards and labelling for motor vehicle: A comprehensive review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 25(C), pages 18-33.
    3. Bruno De Borger & Stef Proost, 2015. " Tax and regulatory policies for European Transport – getting there, but in the slow lane," Working Papers Department of Economics 497597, KU Leuven, Faculty of Economics and Business, Department of Economics.
    4. Eliasson, Jonas & Proost, Stef, 2015. "Is sustainable transport policy sustainable?," Transport Policy, Elsevier, vol. 37(C), pages 92-100.
    5. repec:gam:jsusta:v:9:y:2017:i:5:p:809-:d:98531 is not listed on IDEAS

    More about this item

    Keywords

    Energy efficiency policies; Innovation; Cost interdependencies; Energy tax; Fuel efficiency standard; Climate changes;

    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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