Does Government Precommitment Promote Environmental Innovation?
Date
01.01.1998
01.01.1998
Authors
Emmanuel Petrakis, Anastasios Xepapadeas
JEL Code
L12,Q25,Q28
L12,Q25,Q28
Keywords:
Monopoly,Non-credible policies,Precommitment,Emission Tax,Abatement effort
Monopoly,Non-credible policies,Precommitment,Emission Tax,Abatement effort
Publisher
Climate Change and Sustainable Development
Climate Change and Sustainable Development
Editor
Carlo Carraro
Carlo Carraro
This paper investigates the effect of credibility of environmental policies on environmental innovation and welfare. When the government precommits to an emission tax, the monopolist’s abatement effort is lower than if the environmental policy is at the government’s discretion. Time consistent emission tax is lower than optimal emission tax under precommitment. Finally, welfare is always higher if the government can commit to an emission tax.