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We often use delegation as a commitment device if a government faces problems of timeinconsistency. McCallum (1995, AER P&P) challenged this practice, claiming that delegation merely relocates the commitment problem but does not solve it. In a model where delegation and specific policies are subject to the same commitment technology it is shown that McCallum's conjecture holds if optimal ex-ante policies are fixed. However, with a flexibility-credibility trade-off delegation is both desirable and improves credibility. While delegation does not increase commitment per se it makes it more attractive and increases investments in credibility. Delegation can therefore serve as a valid commitment device.

The performance of market based environmental regulation is affected by patents and vice versa. This interaction is studied for a new type of innovation where new technologies reduce emissions of a specific pollutant but at the same time cause a new type of damage. A robust finding is that the efficiency of permits is affected by monopoly pricing of the patent-holding firm. This result carries over to other types of innovation. Taxes are inefficient if technologies produce perfect substitutes and share all scarce inputs. Moreover, the optimal tax on pollution might be negative.

The present thesis extends the economic literature by introducing green horizontal innovation. Green horizontal innovation is characterized by new technologies that solve an existing pollution problem but give rise to a new one at the same time. A prominent example are CFCs that once replaced poisonous refrigants but are now phased-out themselves. Even groundbreaking technological advances are often merely shifting instead of solving environmental problems. Another concept introduced in this thesis is technological uncertainty. Ex-ante the properties of the next technology developed are not known. New technologies can be of two types. Either they come as perfectly clean 'backstop' technologies or as green horizontal innovations and are labeled 'boomerangs'. In an infinite horizon model the socially optimal pollution and R&D policies under green horizontal innovation and technological uncertainty are derived. The main results are that in the absence of a backstop all available polluting technologies should be engaged in production. Moreover, under technological uncertainty a finite sequence of innovations is optimal. This informs ongoing policy debates like the one on the future of electricity production where there are trade-offs between two polluting technologies – nuclear power and fossil fuels. Moreover, the present thesis evaluates implementation strategies under green horizontal innovation. In a two-period model the government grants patents and adjusts environmental policy in case innovation occurs. However, the government is assumed to be unable to pre-commit on future environmental policies. The key insight is that tradable permits can fail to implement static efficient allocations. Efficiency is limited by patent holder's monopoly pricing. The owner of the new technology might choose a license fee that restricts output to levels below the social optimum. Quantity regulation via pollution permits is therefore not effective. In contrast to previous results in the literature this also holds under vertical environmental innovation. The interaction between patents and environmental regulation goes therefore both ways. The choice of the environmental instrument affects incentives to innovation and patents create distortions in output markets. More sophisticated instruments are shown to be able to reduce the distortions caused by patents. A government's ability to commit is crucial for dynamic efficiency. A prominent concept to solve the time-inconsistency problem is to delegate specific policies to an independent agency, e.g. a central bank. McCallum (1995) criticized this approach by claiming that delegation does not solve the commitment problem but merely relocates it. McCallum's critique is formalized and partially contradicted. If there is uncertainty over future states of the world, delegation can improve credibility. Commitment is achieved by the costs incurred to pass and later change a law or the constitution. The higher these costs, the more credible are the associated policies. However, if there is uncertainty over the optimal future policy, these costs reduce a government's flexibility. Hence, there is a trade-off between credibility and flexibility. Delegation is able to relax this trade-off if the bureaucrat responds to shocks in a way that is at least somewhat in line with the government's preferences. Under uncertainty the government has more incentives to invest into credibility if she delegates. This insight explains the observed commitment effect of delegation and helps to improve the institutional design of environmental regulation and other policy areas.

The success of global climate policies over the coming decades depends on the diffusion of 'green' technologies. This requires that international environmental agreements (IEAs) and trade-related intellectual property rights (TRIPs) interact productively.Using a simple and tractable model, we highlight the strategic reduction in abatement commitments on account of a hold-up effect. In anticipation of rent extraction by the innovator signatories might abate less than non-signatories turning the IEA 'brown'. Self-enforcing IEAs have fewer signatories and diffusion can reduce global abatement under TRIPs. Countries hosting patent holders extract rents from TRIPs, but may be better off without them.

In this article, we explain why the current climate policy mix of the European Union (EU), consisting of the EU Emissions Trading System (ETS) and overlapping policies, is incoherent with respect to emission abatement and cost-effectiveness. The concept of policy coherence guides our analysis in identifying the EU ETS' current dynamic supply adjustment mechanism, the Market Stability Reserve (MSR), to be at the heart of the shortcomings of current market design. Incoherence emerges due to the MSR's quantity-based indicator for scarcity. It only works well for current and past demand fluctuations, but not for anticipated changes in demand, e.g., caused by a member state's fossil-fuel phase-out. As a result, instead of fostering synergies as intended, the MSR undermines coherence by creating backfiring interactions and making precise predictions of overlapping policies' impacts close to impossible. Considering the European Commission's reform proposal of July 2021, we argue that a change in the MSR's parametrisation leaves the fundamental cause of incoherence unaddressed. Based on recent findings in the economics literature, we propose introducing a price-based indicator for scarcity as a solution to substantially reduce the current incoherence of the policy mix.

How decision makers respond to behavioral and traditional interventions might depend on their and the regulator's attributes. This online experiment investigates the effect of defaults, recommendations, and mandatory minimum contributions accompanied by regulator information on the private provision of climate protection, accounting for intrinsic motivation. Findings show that all interventions increase the propensity of individuals to choose the focal value. There is no evidence that recommendations and defaults change average contributions. We report a negative interaction of the default with intrinsic motivation. Expert or political regulator information decreases intervention effectiveness. The study improves our understanding of behavioral public policy instruments.