The Canadian policy of taxing old,but not new,oil wells in Alberta in Alberta in the 1970s, I: was an ingenious way to tax oil rigs that were already located within Canada without discouraging exploration for new oil reserves;
II: was ill-conceived since it ignored the time-inconsistency problem.

Question

Quizplus · Accepted Answer

The statement I is not entirely true as the policy did discourage investment in developing new oil reserves as companies would prefer to produce oil from old wells to avoid the taxation. The statement II is true as the policy did not take into account that a future government may not honor the exemption leading to issues with credibility and time inconsistency.

The Canadian Policy of Taxing Old,but Not New,oil Wells in Alberta