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The Time-Inconsistency of Alternative Energy Policy
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1725-6704
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EUI ECO; 2007/32
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D’ARTIGUES, Agnès, PERCEBOIS, Jacques, VIGNOLO, Thierry, The Time-Inconsistency of Alternative Energy Policy, EUI ECO, 2007/32 - https://hdl.handle.net/1814/7258
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