Subsidies for Wind Power: Surfing down the Learning Curve?
AbstractWe develop a model with two types of electricity producers, fossil fuel utilities generating emissions, and suppliers of electricity from renewable resources such as wind energy. We account for the vertical structure of the wind-energy sector by considering wind-turbine producers engaged in learning by doing and selling their turbines to turbine operators. We show that in the absence of learning spillovers a first-best policy requires Pigouvian taxes only. We also study second-best optimal subsidies on electricity generated by wind power when (optimal) emission taxes are ruled out. We further investigate the impact of subsidies on prices, output, the number of firms, and environmental damage. It turns out that, in the case of purely private learning, secondbest optimal subsidies should only account for the environmental damage but are not necessary to spur learning. --
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Bibliographic InfoPaper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2007,28.
Date of creation: 2007
Date of revision:
learning by doing; renewable energies; environmental policy; Pigouvian taxes; subsidies; feed-in tariffs;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-19 (All new papers)
- NEP-ENE-2007-12-19 (Energy Economics)
- NEP-ENV-2007-12-19 (Environmental Economics)
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