Climate policy as expectation management?

Arbeitspapier

It is believed that the primary economic solution to climate change is an introduction of a carbon pricing system anchored to the social cost of carbon, either as a form of tax or tradable permits. Potentially significant externalities accompanying the introduction of emission-reducing technologies, however, imply that the standard argument does not capture some important aspects for the designing of climate policy such as expectation-driven technology adoption. By using a simple model, we show some possible cases where carbon emission reduction progresses in a self-fulfilling prophecy by firms expecting others' future actions. In such circumstances, the carbon pricing system does not have much influence on determining the final outcome of economy-wide emission reduction. This highlights the danger of overemphasis on finding the 'right' carbon price in policy making and the role of climate policy as expectation management.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 1624

Classification and Topics

• Classification: Wirtschaft ; Climate; Natural Disasters and Their Management; Global Warming ; Technological Change: Choices and Consequences; Diffusion Processes
• Subject: Climate policy ; technology choice ; expectations ; multiple equilibria ; Klimaschutz ; Ökosteuer ; Emissionsrechte ; Erwartungstheorie ; Umwelttechnik ; Technologiewahl ; Gleichgewicht ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Narita, Daiju
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/32809
• Last update: 10.03.2025, 11:44 AM CET