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 Socioeconomic Institute - University of Zurich in its series SOI - Working Papers with number 1010.
Length: 40 pages
Date of creation: Sep 2010
Date of revision:
Renewable electricity; Feed-in tariffs; Regulatory pre-commitment; Tradable green certificates; Quota target; Innovation; Energy policy;
Other versions of this item:
- Madlener, Reinhard & Neustadt, Ilja, 2010. "Renewable Energy Policy in the Presence of Innovation: Does Government Pre-Commitment Matter?," FCN Working Papers 4/2010, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised Jun 2010.
- 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-2010-11-20 (All new papers)
- NEP-ENE-2010-11-20 (Energy Economics)
- NEP-ENV-2010-11-20 (Environmental Economics)
- NEP-REG-2010-11-20 (Regulation)
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