Too good to be true? How time-inconsistent renewable energy policies can deter investments

Arbeitspapier

The transition towards low-carbon economies requires massive investments into renewable energies, which are commonly supported through regulatory frameworks. Yet, governments can have incentives - and the ability - to deviate from previously-announced support once those investments have been made, which can deter investments. We analyze a renewable energy regulation game, apply a model of time-inconsistency to renewable energy policy and derive under what conditions governments have incentives to deviate from their commitments. We analyze the effects of various support policies and deployment targets and explain why Spain conducted retrospective changes in the period 2010-2013 whereas Germany stuck to its commitments.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 1726

Classification and Topics

• Classification: Wirtschaft ; Alternative Energy Sources ; Environmental Economics: Technological Innovation ; Technological Change: Government Policy ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
• Subject: Time-Inconsistency ; Regulation ; Targets ; Renewable Energy Policy ; Investments

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): May, Nils ; Chiappinelli, Olga
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/176791
• Last update: 10.03.2025, 11:44 AM CET