Efficiency and Acceptability of Climate Policies: Race Against the Lock-Ins
9 Pages Posted: 25 Nov 2013
Date Written: November 21, 2013
Policymakers have good reasons to favor capital-based policies - such as CAFE standards or feebates programs - over a carbon price. A carbon price minimizes the discounted cost of a climate policy, but may result in existing capital being under-utilized or scrapped before its scheduled lifetime, hurt the workers that depend on it, and inflict an immediate income drop. Capital-based policies avoid these obstacles, but can reach a given climate target only if implemented early enough. Delaying mitigation policies may thus create a political-economy lock-in (easier-to-implement policies become unavailable) in addition to the economic lock-in (the target becomes more expensive).
Keywords: Intergenerational Equity, Sectoral Policies, Mothballing
JEL Classification: L50, O44, Q52, Q54, Q58
Suggested Citation: Suggested Citation