We study the incidence of carbon-reduction and green-energy promotion policies in a general equilibrium small open economy that depends on imports of fossil fuels. The focus is on mixed policies that are either price based (emissions taxes and producer price subsidies for green energy) or quantity based (schemes of trading emissions and green certificates). Policy instruments directed head-on toward promoting green energy are shown to also reduce carbon emissions and vice versa but the direct effects are stronger than the side effects, the more so, the greater is the elasticity of substitution in consumption between energy and consumption goods. We calculate the effects of variations in individual policy parameters on all endogenous variables, among them the energy price and the welfare costs. We also determine the impact of exogenous fossil-fuel price shocks on the economy.
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Paper provided by Universität Siegen, Fachbereich Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht in its series Volkswirtschaftliche Diskussionsbeitraege with number
131-09.
Find related papers by JEL classification: Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
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