Implications of diverging social and private discount rates for investments in the German power industry: a new case for nuclear energy?
AbstractFor power-plant investments, utilities rely after liberalisation on private financial markets, which are in general distorted. The (related) split of social and private time-preference rates provides a new reason for a welfare-enhancing policy intervention, complementary to environmental policy (Heinzel and Winkler 2007). This paper quantifies it and studies its relevance for the German power industry around 2015. The distortions remain moderate as compared to other investment subsidies. However, in contrast to environmental policy alone, its additional implementation makes nuclear power the first option even in the nuclear high-cost scenario. Both policies enhance ecological structural change, which end-of-pipe abatement delays. --
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Bibliographic InfoPaper provided by Dresden University of Technology, Faculty of Business and Economics, Department of Economics in its series Dresden Discussion Paper Series in Economics with number 03/08.
Date of creation: 2008
Date of revision:
distorted time preferences; environmental and technology policy; conventional energy technologies;
Find related papers by JEL classification:
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
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