The time-inconsistency of alternative energy policy

Thierry Vignolo (), Jacques Percebois () and Agnes dArtigues ()
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Thierry Vignolo: EUI
Jacques Percebois: Creden
Agnes dArtigues: Creden

Economics Bulletin, 2007, vol. 1, issue 1, 1-7

Abstract: Time-inconsistency can arise when a government attempts to convince private sector to use a particular alternative energy (gas, green electricity...) rather than petroleum products. By introducing taxes and feed-in prices, a government would encourage firms and households to switch to an alternative energy rather than use petroleum products. However, even if a government is in favor of increasing alternative energy consumption, it can benefit from considerable financial resources resulting from petroleum product consumption. As a result of these conflicting issues, the private sector may not find the alternative energy policy credible, which prevents the government to implement a socially efficient policy.

Keywords: Time-inconsistency; Energy; policy; Tax; expenditures (search for similar items in EconPapers)
JEL-codes: A1 (search for similar items in EconPapers)
Date: 2007-03-21
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Citations: View citations in EconPapers (1)

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