Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/69494
Authors: 
Voß, Achim
Year of Publication: 
2013
Series/Report no.: 
CAWM Discussion Paper, Centrum für Angewandte Wirtschaftsforschung Münster 62
Abstract: 
Public energy productivity investment influences the amount of future energy consumption. If a present government expects its successor to value the social costs of fuel usage differently, this adds a strategic component to its investment considerations. We analyze this governmental time-inconsistency situation as a sequential game. In particular, we show how the expectation of a more conservative party taking over makes a green government choose an investment level that is ineffcient in that neither of the parties would prefer it to the investment level of a permanent green government. Under some circumstances, the opposition would even prefer the government to stay in power for sure: The gain of avoiding strategic investment then outweighs the loss of not being able to regulate energy consumption. We also analyze welfare gains of binding agreements.
Subjects: 
political economics
environmental policy
energy policy
energy effciency
rebound effects
energy externalities
strategic investment
sequential games
time-inconsistency
JEL: 
Q48
Q58
Q55
D72
Document Type: 
Working Paper

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