Gerhard Sorger
University of Vienna
Austria
Dynamic Games and Applications Seminar
Climate policy under political pressure
November 23, 11:00 AM — 12:00 PM (Montreal time)
We propose a theoretical framework to study the implications of political pressure on optimal climate policy. A key feature of the framework is its ability to capture dynamic inconsistency, which naturally arises from the long time horizon of climate policies and their susceptibility to modifications due to political pressure. Our findings offer a new rationale for why green lobbying can make pollution regulation less stringent. We also show that political pressure from the polluting sector leads to a higher rate of clean energy investment chosen by the government and can facilitate the transition from dirty to clean technologies. (with Andrei Kalk)