Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/218980
Authors: 
Chiappinelli, Olga
Neuhoff, Karsten
Year of Publication: 
2020
Series/Report no.: 
DIW Discussion Papers 1859
Abstract: 
Carbon pricing decisions by governments are prone to time-inconsistency, which causes the private sector to underinvest in emission-reducing technologies. We show that incentives for decarbonization can be improved if complementing carbon pricing with carbon contracts for differences, where the government commits to pay a fixed carbon price level to the investors. We derive conditions under which the government is willing to "tie its hands" with the contracts.
Subjects: 
Carbon pricing
Time-inconsistency
Green technology
Climate policy
Carbon contracts
JEL: 
C73
L51
O31
Q58
Additional Information: 
A previous version of this paper was titled: "Time-consistent carbon pricing".
Document Type: 
Working Paper

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