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Investment Subsidies and Time-Consistent Environmental Policy

  • Abrego, Lisandro
  • Perroni, Carlo

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.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp533.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 533.

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Length: 22 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:wrk:warwec:533
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Web page: http://www2.warwick.ac.uk/fac/soc/economics/

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  14. Pearce, David & Stacchetti, Ennio, 1997. "Time Consistent Taxation by a Government with Redistributive Goals," Journal of Economic Theory, Elsevier, vol. 72(2), pages 282-305, February.
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  17. Popp, David C., 2001. "The effect of new technology on energy consumption," Resource and Energy Economics, Elsevier, vol. 23(3), pages 215-239, July.
  18. Agostini, Paola & Botteon, Michele & Carraro, Carlo, 1992. "A carbon tax to reduce CO2 emissions in Europe," Energy Economics, Elsevier, vol. 14(4), pages 279-290, October.
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