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Memorandum, Department of Economics, University of Oslo >
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http://hdl.handle.net/10419/47313
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| Title: | | Climate policy without commitment  |
| Authors: | | Golombek, Rolf Greaker, Mads Hoel, Michael |
| Issue Date: | | 2010 |
| Series/Report no.: | | Memorandum // Department of Economics, University of Oslo 2010,02 |
| Abstract: | | 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. |
| Subjects: | | Time consistency carbon tax climate policy R&D endogenous technological change |
| JEL: | | H21 O30 Q2 Q28 Q42 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Memorandum, Department of Economics, University of Oslo
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