Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172832
Authors: 
Chiappinelli, Olga
Neuhoff, Karsten
Year of Publication: 
2017
Series/Report no.: 
DIW Discussion Papers 1710
Abstract: 
In this paper we show that carbon pricing is subject to time-inconsistency and we investigate solutions to improve on the problem and restore the incentive for the private sector to invest in low-carbon innovation. We show that a superior price-investment equilibrium can be sustained in the long-term, if the policy-maker is enough forward looking and allowed to build reputation. In the short-term, time-inconsistency can be alleviated by complementing carbon pricing with project-based carbon price guarantees.
Subjects: 
Carbon pricing
Time-inconsistency
Low-carbon innovation
Environmental regulation
Repeated games
Carbon contracts
JEL: 
C73
L51
O31
Q58
Document Type: 
Working Paper

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