Climate policy without commitment

Arbeitspapier

Climate mitigation policy should be imposed over a long period, and spur development of new technologies in order to make stabilization of green house gas concentrations economically feasible. The government may announce current and future policy packages that stimulate current R&D in climate-friendly technologies. However, once climate-friendly technologies have been developed, the government may have no incentive to implement the pre-announced future policies, that is, there may be a time inconsistency problem. We show that if the government can optimally subsidize R&D today, there is no time inconsistency problem. Thus, lack of commitment is not an argument for higher current R&D subsidies. If the offered R&D subsidy is lower than the optimal subsidy, the current (sub-game perfect) climate tax should exceed the first-best climate tax.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 2909

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Innovation; Research and Development; Technological Change; Intellectual Property Rights: General ; Renewable Resources and Conservation: General ; Renewable Resources and Conservation: Government Policy ; Alternative Energy Sources
• Subject: time consistency ; carbon tax ; climate policy ; R&D ; endogenous technological change

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Golombek, Rolf ; Greaker, Mads ; Hoel, Michael
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/30576