Quantities vs. capacities: Minimizing the social cost of renewable energy promotion
AbstractIn this article we show how different promotion schemes for renewables affect economic welfare. Our starting point is that external benefits of renewable electricity supply besides the abatement of greenhouse gases are not related to actual electricity generation but to producing and installing capacity. We argue that generation based subsidies such as feed-in tariffs and bonus payments can only be a second-best solution. Our model framework allows us to explain how these second-best instruments cause welfare losses in an environment of volatile demand. We postulate that capacity payments for renewables should be implemented in order to avoid unnecessary social costs. --
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Bibliographic InfoPaper provided by Center of Applied Economic Research Münster (CAWM), University of Münster in its series CAWM Discussion Papers with number 59.
Date of creation: 2012
Date of revision:
Renewable Energy Sources; Energy Policy; Promotion Instruments;
Other versions of this item:
- Mark Andor & Kai Flinkerbusch & Achim Voß, . "Quantities vs. Capacities: Minimizing the Social Cost of Renewable Energy Promotion," Working Papers 201284, Institute of Spatial and Housing Economics, Munster Universitary.
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-09 (All new papers)
- NEP-ENE-2012-09-09 (Energy Economics)
- NEP-ENV-2012-09-09 (Environmental Economics)
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