Renewable Energy Policy in the Presence of Innovation: Does Government Pre-Commitment Matter?
AbstractIn a perfectly competitive market with a possibility of technological innovation we contrast guaranteed feed-in tariffs for electricity from renewables and tradable green certificates from a dynamic efficiency and social welfare point of view. Specifically, we model decisions about the technological innovation with convex costs within the framework of a game-theoretic model, and discuss implications for optimal policy design under different assumptions regarding regulatory pre-commitment. We find that for the case of technological innovation with convex costs subsidy policies are preferable over quota-based policies. Further, in terms of dynamic efficiency, no pre-commitment policies are shown to be at least as good as the pre-commitment ones. Thus, a government with a preference for innovation being performed if the achievable cost reduction is high should be in favor of the no pre-commitment regime.
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Bibliographic InfoPaper provided by E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) in its series FCN Working Papers with number 4/2010.
Length: 40 pages
Date of creation: Apr 2010
Date of revision: Jun 2010
Renewable Electricity; Feed-In Tariffs; Regulatory Pre-Commitment; Tradable Green Certificates; Quota Target; Innovation; Energy Policy;
Other versions of this item:
- Reinhard Madlener & Ilja Neustadt, 2010. "Renewable energy policy in the presence of innovation: does government pre-commitment matter?," Working Papers 1010, University of Zurich, Socioeconomic Institute.
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-26 (All new papers)
- NEP-ENE-2010-06-26 (Energy Economics)
- NEP-ENV-2010-06-26 (Environmental Economics)
- NEP-INO-2010-06-26 (Innovation)
- NEP-MIC-2010-06-26 (Microeconomics)
- NEP-REG-2010-06-26 (Regulation)
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