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Subsidies for Renewable Energies in the Presence of Learning Effects and Market Power

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  • Johanna Reichenbach
  • Till Requate

Abstract

We study the impact of learning by doing, learning spill-overs, and imperfect competition in a model with two types of electricity producers, an oligopolistic sector of polluting fossil-fuel utilities and a competitive fringe of non-polluting generators of electricity from renewable energy sources (RES-E). Furthermore we consider an upstream industry of RES-E equipment producers engaged in learning by doing. We show that a first-best policy requires two instruments, a tax in the fossil-fuel sector and an output subsidy for RES-E equipment producers. We then study second-best-optimal feed-in tariffs that are paid to the generators of RES-E. By means of simulations we calculate the welfare loss of a second-best-optimal feed-in-tariff policy and analyze how market structure impacts on second-best-optimal feed-in tariffs

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1689.

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Length: 48 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:kie:kieliw:1689

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Keywords: feed-in tariffs; environmental subsidies; learning by doing; spill-overs; market structure;

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Citations

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Cited by:
  1. Johanna Reichenbach & Till Requate, 2011. "Subsidies for Renewable Energies in the Presence of Learning Effects and Market Power," Kiel Working Papers 1689, Kiel Institute for the World Economy.
  2. Bahr, Gunter & Narita, Daiju & Rickels, Wilfried, 2012. "Recent developments in European support systems for renewable power," Kiel Policy Brief 53, Kiel Institute for the World Economy (IfW).
  3. Ben Jebli, Mehdi & Ben Youssef, Slim, 2013. "Timing of adoption of clean technologies, transboundary pollution and international trade," Economics Discussion Papers 2013-50, Kiel Institute for the World Economy.
  4. Joan Canton & �sa Johannesson Lind�n, 2010. "Support schemes for renewable electricity in the EU," European Economy - Economic Papers 408, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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