Journal Article

Credible Carbon Policy

Dieter Helm, Cameron Hepburn and Richard Mash

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 19, issue 3, pages 438-450
Published in print September 2003 | ISSN: 0266-903X
Published online September 2003 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/19.3.438
Credible Carbon Policy

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  • Economic Development and Growth
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The paper sets out the credibility problem in carbon policy, provides a number of examples of non-credibility in recent energy policy, and identifies the costs of failing to address it. The time inconsistency of carbon policy—arising because of multiple objectives, the irreversibility of energy investments, and the scope for ex-post reneging on ex-ante commitments to set policy instruments, such as carbon taxes or emission permits, at appropriate levels—is set in a conceptual framework. Analogies with monetary policy are drawn, and a solution to the time-inconsistency problem is proposed through the establishment of an energy/carbon agency.

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Subjects: Economic Development and Growth ; Public Economics ; Political Economy ; Public Policy

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