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How Disagreement about Social Costs leads to Inefficient Energy Productivity Investment

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  • Achim Voß

Abstract

Public energy productivity investment influences the amount of future energy consumption. If a present government expects its successor to value the social costs of fuel usage di erently, this adds a trategic component to its investment considerations. We analyze this governmental time-inconsistency situation as a sequential game. In particular, we show how the expectation of a more conservative party taking over makes a “green” government choose an investment level that is inecient in that neither of the parties would prefer it to the investment level of a permanent green government. Under some circumstances, the opposition would even prefer the government to stay in power for sure: The gain of avoiding strategic investment then outweighs the loss of not being able to regulate energy consumption. We also analyze welfare gains of binding agreements.

Suggested Citation

  • Achim Voß, "undated". "How Disagreement about Social Costs leads to Inefficient Energy Productivity Investment," Working Papers 201287, Institute of Spatial and Housing Economics, Munster Universitary.
    • Handle: RePEc:muc:wpaper:201287
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    2. Voss, Achim, "undated". "The Adverse Effect of Energy-Efficiency Policy," FEP: Future Energy Program 291522, Fondazione Eni Enrico Mattei (FEEM) > FEP: Future Energy Program.

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    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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