The Time-Inconsistency of Alternative Energy Policy
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.
|Date of creation:||2007|
|Date of revision:|
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- Richard Mash & Cameron Hepburn & Dieter Helm, 2004.
"Time-Inconsistent Environmental Policy And Optimal Delegation,"
Royal Economic Society Annual Conference 2004
14, Royal Economic Society.
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"Rules, discretion and reputation in a model of monetary policy,"
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Elsevier, vol. 12(1), pages 101-121.
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- Marsiliani, Laura & Renstrom, Thomas I, 2000. "Time Inconsistency in Environmental Policy: Tax Earmarking as a Commitment Solution," Economic Journal, Royal Economic Society, vol. 110(462), pages C123-38, March.
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