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

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  • David Anthoff
  • Robert Hahn

Abstract

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.

Suggested Citation

  • David Anthoff & Robert Hahn, 2010. "Government failure and market failure: on the inefficiency of environmental and energy policy," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(2), pages 197-224, Summer.
  • Handle: RePEc:oup:oxford:v:26:y:2010:i:2:p:197-224
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    1. > Environmental and Natural Resource Economics > Climate economics > Policy instruments

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    Cited by:

    1. Hallegatte, Stephane & Heal, Geoffrey & Fay, Marianne & Treguer, David, 2011. "From growth to green growth -- a framework," Policy Research Working Paper Series 5872, The World Bank.
    2. Andrea Kollmann & Friedrich Schneider, 2010. "Why Does Environmental Policy in Representative Democracies Tend to Be Inadequate? A Preliminary Public Choice Analysis," Sustainability, MDPI, vol. 2(12), pages 1-25, November.
    3. Millner, Antony & Olivier, Helene, 2016. "Beliefs, politics, and environmental policy," LSE Research Online Documents on Economics 67299, London School of Economics and Political Science, LSE Library.
    4. Antony Millner & Hélène Ollivier, 2016. "Beliefs, Politics, and Environmental Policy," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 10(2), pages 226-244.
    5. Yifei Zhang & Sheng Li & Fang Zhang, 2020. "Does an Emissions Trading Policy Improve Environmental Efficiency? Evidence from China," Sustainability, MDPI, vol. 12(6), pages 1-16, March.
    6. Tol, Richard S.J., 2017. "The structure of the climate debate," Energy Policy, Elsevier, vol. 104(C), pages 431-438.
    7. Michael J. Hall, 2015. "Public investments in sustainable technology: an evaluation of North Carolina's Green Business Fund," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 24(5), pages 436-456, July.
    8. Mirzabaev, Alisher & Guta, Dawit & Goedecke, Jann & Gaur, Varun & Börner, Jan & Virchow, Detlef & Denich, Manfred & von Braun, Joachim, 2014. "Bioenergy, Food Security and Poverty Reduction: Mitigating tradeoffs and promoting synergies along the Water- Energy-Food Security Nexus," Working Papers 180421, University of Bonn, Center for Development Research (ZEF).
    9. Pedro H. Albuquerque & Kiara S. Winans, 2023. "Technological Innovations and Obsolescence: Leveling the Playing Field for Remanufacturing," AMSE Working Papers 2314, Aix-Marseille School of Economics, France.
    10. Purkus, Alexandra & Gawel, Erik & Thrän, Daniela, 2012. "Bioenergy governance between market and government failures: A new institutional economics perspective," UFZ Discussion Papers 13/2012, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    11. Wang, Qiang & Chen, Xi, 2013. "Rethinking and reshaping the climate policy: Literature review and proposed guidelines," Renewable and Sustainable Energy Reviews, Elsevier, vol. 21(C), pages 469-477.
    12. Vollebergh, Herman, 2013. "Environmental Taxes and Green Growth," Other publications TiSEM 9efd8e7a-397e-428f-95be-c, Tilburg University, School of Economics and Management.
    13. Gawel, Erik & Strunz, Sebastian & Lehmann, Paul, 2014. "A public choice view on the climate and energy policy mix in the EU — How do the emissions trading scheme and support for renewable energies interact?," Energy Policy, Elsevier, vol. 64(C), pages 175-182.
    14. Sokołowski, Maciej M. & Heffron, Raphael J., 2022. "Defining and conceptualising energy policy failure: The when, where, why, and how," Energy Policy, Elsevier, vol. 161(C).
    15. Sven Rudolph & Friedrich Schneider, 2011. "Did the Japanese Patient Follow the Doctor's Orders? Mostly no! A Public Choice Analysis of Greenhouse Gas Emissions Trading Schemes in Japan before and after the Earthquake," CESifo Working Paper Series 3639, CESifo.
    16. Hallegatte, Stephane & Fay, Marianne & Vogt-Schilb, Adrien, 2013. "Green industrial policies : when and how," Policy Research Working Paper Series 6677, The World Bank.
    17. Sven Rudolph & Friedrich Schneider, 2013. "Political barriers of implementing carbon markets in Japan: A Public Choice analysis and the empirical evidence before and after the Fukushima nuclear disaster," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 15(2), pages 211-235, April.
    18. Jodi L. Short, 2013. "Self-Regulation in the Regulatory Void," The ANNALS of the American Academy of Political and Social Science, , vol. 649(1), pages 22-34, September.
    19. Kärnä, Anders & Karlsson, Johan & Engberg, Erik & Svensson, Peter, 2020. "Political Failure: A Missing Piece in Innovation Policy Analysis," Working Paper Series 1334, Research Institute of Industrial Economics, revised 21 Apr 2022.
    20. Markus Pasche, 2013. "What Can be Learned from Behavioural Economics for Environmental Policy?," Jena Economics Research Papers 2013-020, Friedrich-Schiller-University Jena.
    21. Wangsness, Paal Brevik, 2018. "How to road price in a world with electric vehicles and government budget constraints," Working Paper Series 10-2017, Norwegian University of Life Sciences, School of Economics and Business.
    22. World Bank, 2012. "Inclusive Green Growth : The Pathway to Sustainable Development," World Bank Publications - Books, The World Bank Group, number 6058, December.

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