Government incentives and supervision about renewable energy using in large public buildings

If there is no effective incentive and supervision measures to promote renewable energy in large public buildings, economic incentives may cause moral hazard problems. In accordance with the game theory, the government can not fully grasp the level of actual investment of each large public building owner in using renewable energy. The appropriate incentive and penalty mechanism of government can be designed by the principal - agent theory. Analysis shows that an effective budget-balancing mechanism does not exit under risk neutral condition and the paper constructes a non-budget-balancing mechanism. If the building owners are all fully risk averse in reducing the fund of energy-saving, it is proved that a budget-balancing mechanism exits. If the effective incentives and punishment mechanisms can be established between the owners and the government, the energy efficiency goals can be expected to achieve.