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Investment Subsidies and Time-Consistent Environmental Policy

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  • Abrego, Lisandro
  • Perroni, Carlo

Abstract

We describe a model of dynamic pollution abatement choices with heterogeneous agents, where, due to the presence of a distributional objective and to the absence of incentive-compatible compensation mechanisms, the choice of a second-best level of emission taxation is time-inconsistent. In this model, we investigate whether investment subsidies can act as a substitute for policy commitment.

Suggested Citation

  • Abrego, Lisandro & Perroni, Carlo, 1999. "Investment Subsidies and Time-Consistent Environmental Policy," The Warwick Economics Research Paper Series (TWERPS) 533, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:533
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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