December 5, 2010

Climate Policy as Expectation Management?

by Daiju Narita

- By using a simple model, we show some possible cases where carbon emission reduction progresses in a self-fulfilling prophecy by firms expecting others’ future actions. In such circumstances, the carbon pricing system does not have much influence on determining the final outcome of economy-wide emission reduction. This highlights the danger of overemphasis on finding the "right" carbon price in policy making and the role of climate policy as expectation management.

Narita, D. (2010). "Climate Policy as Expectation Management?" Kiel Working Paper No. 1624, May 2010.