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Refunding ETS proceeds to spur the diffusion of renewable energies: An analysis based on the dynamic oligopolistic electricity market model EMELIE

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  • Traber, Thure
  • Kemfert, Claudia

Abstract

We use a quantitative electricity market model to analyze the welfare effects of refunding a share of the emission trading proceeds to support renewable energy technologies that are subject to experience effects. We compare effects of supporting renewable energies under both perfect and oligopolistic competition with competitive fringe firms and emission trading regimes that achieve 70 and 80% emission reductions by 2050. The results indicate the importance of market power for renewable energy support policy. Under imperfect competition welfare improvements is maximized by refunding 10% of the emission trading proceeds, while under perfect competition the optimal refunding share is only 5%. However, under both behavioral assumptions we find significant welfare improvements due to experience effects which are induced by the support for renewable energy.

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Bibliographic Info

Article provided by Elsevier in its journal Utilities Policy.

Volume (Year): 19 (2011)
Issue (Month): 1 (January)
Pages: 33-41

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Handle: RePEc:eee:juipol:v:19:y:2011:i:1:p:33-41

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Web page: http://www.elsevier.com/locate/inca/30478

Related research

Keywords: Emission trading Renewable energy support Experience effects Imperfect competition;

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References

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  1. Gersbach, Hans & Requate, Till, 2004. "Emission taxes and optimal refunding schemes," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 713-725, March.
  2. Thure Traber & Claudia Kemfert, 2009. "Impacts of the German Support for Renewable Energy on Electricity Prices, Emissions, and Firms," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 155-178.
  3. Parry, Ian & Pizer, William & Fischer, Carolyn, 2002. "How Large Are the Welfare Gains from Technological Innovation Induced by Environmental Policies?," Discussion Papers dp-00-15-rev, Resources For the Future.
  4. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2005. "A tale of two market failures: Technology and environmental policy," Ecological Economics, Elsevier, vol. 54(2-3), pages 164-174, August.
  5. Till Requate, 1993. "Pollution control in a Cournot duopoly via taxes or permits," Journal of Economics, Springer, vol. 58(3), pages 255-291, October.
  6. Gerlagh, R. & Kverndokk, S. & Rosendahl, K.E., 2009. "Optimal timing of climate change policy: Interaction between carbon taxes and innovation externalities," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3777015, Tilburg University.
  7. James B. Bushnell & Erin T. Mansur & Celeste Saravia, 2008. "Vertical Arrangements, Market Structure, and Competition: An Analysis of Restructured US Electricity Markets," American Economic Review, American Economic Association, vol. 98(1), pages 237-66, March.
  8. Kverndokk, Snorre & Rosendahl, Knut Einar, 2007. "Climate policies and learning by doing: Impacts and timing of technology subsidies," Resource and Energy Economics, Elsevier, vol. 29(1), pages 58-82, January.
  9. Uyterlinde, Martine A. & Junginger, Martin & de Vries, Hage J. & Faaij, Andre P.C. & Turkenburg, Wim C., 2007. "Implications of technological learning on the prospects for renewable energy technologies in Europe," Energy Policy, Elsevier, vol. 35(8), pages 4072-4087, August.
  10. Rubin, Edward S. & Chen, Chao & Rao, Anand B., 2007. "Cost and performance of fossil fuel power plants with CO2 capture and storage," Energy Policy, Elsevier, vol. 35(9), pages 4444-4454, September.
  11. van der Zwaan, B. C. C. & Gerlagh, R. & G. & Klaassen & Schrattenholzer, L., 2002. "Endogenous technological change in climate change modelling," Energy Economics, Elsevier, vol. 24(1), pages 1-19, January.
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Cited by:
  1. Andreas Schröder & Thure Traber & Claudia Kemfert, 2013. "Market Driven Power Plant Investment Perspectives in Europe: Climate Policy and Technology Scenarios until 2050 in the Model EMELIE-ESY," Discussion Papers of DIW Berlin 1268, DIW Berlin, German Institute for Economic Research.

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