Advanced Search
MyIDEAS: Login to save this paper or follow this series

Optimal Environmental Policy Design In The Presence Of Uncertainty And Technology Spillovers

Contents:

Author Info

  • Patrick Himmes

    ()

  • Christoph Weber

    ()
    (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)

Abstract

The stylized model presented in this paper extends the approach developed by Fischer and Newell (2008) by analysing the optimal policy design in a context with more than one externality while taking explicitly into account uncertainty surrounding future emission damage costs. In the presence of massive uncertainties and technology spillovers, well-designed sup-port mechanisms for renewables are found to play a major role, notably as a means for compensating for technology spillovers, yet also for reducing the investors’ risks. How-ever, the design of these support mechanisms needs to be target-aimed and well-focused. Besides uncertainty on the state of the world concerning actual marginal emission damage, we consider the technological progress through R&D as well as learning-by-doing. A portfolio of three policy instruments is then needed to cope with the existing externalities and optimal instrument choice is shown to be dependent on risk aversion of society as a whole as well as of entrepreneurs. To illustrate the role of uncertainty for the practical choice of policy instruments, an em-pirical application is considered. The application is calibrated to recent global data from IEA and thus allows identifying the main drivers for the optimal policy mix. In addition to assumptions on technology costs and uncertainty of emission damage cost, the impor-tance of technology spillover clearly plays a key role. Yet under some plausible parame-ter settings, direct subsidies to production are found to be of lower importance than very substantial R&D supports.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.wiwi.uni-due.de/fileadmin/fileupload/BWL-ENERGIE/Arbeitspapiere/RePEc/pdf/wp1102_Himmes_and_Weber_Climate_policies_under_uncertainty_Exeter.pdf
File Function: First version, 2011
Download Restriction: no

Bibliographic Info

Paper provided by University of Duisburg-Essen, Chair for Management Science and Energy Economics in its series EWL Working Papers with number 1102.

as in new window
Length: 21 pages
Date of creation: Mar 2011
Date of revision: Mar 2011
Handle: RePEc:dui:wpaper:1102

Contact details of provider:
Postal: Universitätsstrasse 12, 45117 Essen
Phone: 0201 - 183 3633
Fax: 0201 - 183 2292
Web page: http://www.ewl.wiwi.uni-due.de
More information through EDIRC

Related research

Keywords: Externality; technology; learning; uncertainty; climate change; spillover; renewable energy; policy;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Stavins, Robert & Jaffe, Adam & Newell, Richard, 2004. "A Tale of Two Market Failures: Technology and Environmental Policy," Discussion Papers dp-04-38, Resources For the Future.
  2. Bläsi, Albrecht & Requate, Till, 2007. "Subsidies for Wind Power: Surfing down the Learning Curve?," Economics Working Papers 2007,28, Christian-Albrechts-University of Kiel, Department of Economics.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mohajan, Haradhan, 2011. "Optimal Environmental Taxes Due to Health Effect," MPRA Paper 50672, University Library of Munich, Germany, revised 17 Apr 2011.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:dui:wpaper:1102. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Andreas Fritz).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.