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Government failure and market failure: on the inefficiency of environmental and energy policy

  • David Anthoff
  • Robert Hahn

In this article, we describe some important themes in energy and environmental policy. There are two main reasons for our interest in these policies. First, such policies will likely be important in the coming decades as issues related to climate change and energy security come to the fore. Second, there are important lessons to be learned from a careful review of the actual performance of energy and environmental policies. We undertake a selective survey of the literature to highlight what is known about the efficiency of particular kinds of policies, laws, and regulations in these areas. This paper makes three key contributions. The first is to synthesize a large literature on energy and environmental policy in a way that can be easily digested by both non-experts and experts. The second contribution is to suggest that, if history is a guide, then we should not expect many interventions in these policy areas to come close to maximizing net economic benefits. The third is to suggest what might be needed for the development of more efficient energy and environmental policies. Copyright 2010, Oxford University Press.

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Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

Volume (Year): 26 (2010)
Issue (Month): 2 (Summer)
Pages: 197-224

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Handle: RePEc:oup:oxford:v:26:y:2010:i:2:p:197-224
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  13. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
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  17. Cameron Hepburn & Michael Grubb & Karsten Neuhoff & Felix Matthes & Maximilien Tse, 2006. "Auctioning of EU ETS phase II allowances: how and why?," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 137-160, January.
  18. Timilsina, Govinda R. & Dulal, Hari B., 2009. "A review of regulatory instruments to control environmental externalities from the transport sector," Policy Research Working Paper Series 4867, The World Bank.
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