Politics and Economics of Second-Best Regulation of Greenhouse Gases: The Importance of Regulatory Credibility

摘要: Compared with economically ideal policies, actual limits on global warming gases are likely to be "second-best" in many ways. Most studies focus approaches such as delaying emission controls developing countries, constraining international trading, or regulating piecemeal by sector rather than equally across the whole economy. We show that another second-best approach-lacking of regulatory credibility-imposes up six times extra costs economy when compared all other factors combined. When rules not believable then firms and agents become short-sighted unable make optimal investments research development well long-lived technologies. Although analysts have largely ignored this issue, low credibility is commonplace governments tackle problems because institutions treaties usually weak fickle. Governments can help solve strategies "pre-committing" regulations into domestic law more credible commitments. China, for example, justify unilateral, pre-commitment would encourage Chinese invest a clearer eye future.