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Clean energy: Revisiting the challenges of industrial policy

Author

Listed:
  • Morris, Adele C.
  • Nivola, Pietro S.
  • Schultze, Charles L.

Abstract

Large public investments in clean energy technology arguably constitute an industrial policy. One rationale points to market failures that have not been corrected by other policies, most notably greenhouse gas emissions and dependence on oil. Another inspiration for clean energy policy reflects economic arguments of the 1980s. It suggests strategic government investments would increase U.S. firms' market share of a growing industry and thus help American firms and workers. This paper examines the reasoning for clean energy policy and concludes that:•While a case can be made that subsidizing clean energy might help address market failures, the case may be narrower than some assert, and turning theory into sound practice is no simple feat.•An appropriate price on greenhouse gases is an essential precondition to ensuring efficient incentives to develop and deploy cost-effective emissions-abating technologies. However, efficient prices alone are unlikely to generate efficient levels of basic research and development by private firms.•Government investments in clean energy are unlikely to produce net increases in employment in the long run, in part because pushing home-grown technologies at taxpayers' expense offers no guarantee that the eventual products ultimately would not be manufactured somewhere else.•Spending on clean energy technologies is not well suited to fiscal stimulus.

Suggested Citation

  • Morris, Adele C. & Nivola, Pietro S. & Schultze, Charles L., 2012. "Clean energy: Revisiting the challenges of industrial policy," Energy Economics, Elsevier, vol. 34(S1), pages 34-42.
  • Handle: RePEc:eee:eneeco:v:34:y:2012:i:s1:p:s34-s42
    DOI: 10.1016/j.eneco.2012.08.030
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    References listed on IDEAS

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    1. Krugman, Paul R, 1993. "What Do Undergrads Need to Know about Trade?," American Economic Review, American Economic Association, vol. 83(2), pages 23-26, May.
    2. Miwa, Yoshiro & Ramseyer, J. Mark, 2001. "Japanese Economic Policy and Policy Evaluation―The Case of “Industrial Policy”―," Economic Review, Hitotsubashi University, vol. 52(3), pages 193-204, July.
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    7. Badcock, Jeremy & Lenzen, Manfred, 2010. "Subsidies for electricity-generating technologies: A review," Energy Policy, Elsevier, vol. 38(9), pages 5038-5047, September.
    8. Severin Borenstein, 2012. "The Private and Public Economics of Renewable Electricity Generation," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 67-92, Winter.
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    Citations

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    Cited by:

    1. Marisa Beck, Randall Wigle, 2014. "Carbon Revenue: Recycling versus Technological Incentives," LCERPA Working Papers 0079, Laurier Centre for Economic Research and Policy Analysis, revised 13 Jan 2014.
    2. repec:eee:eneeco:v:64:y:2017:i:c:p:306-320 is not listed on IDEAS
    3. Adolfo Maza & José Villaverde & María Hierro, 2015. "Non- $$\hbox {CO}_2$$ CO 2 Generating Energy Shares in the World: Cross-Country Differences and Polarization," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(3), pages 319-343, July.
    4. repec:eee:enepol:v:111:y:2017:i:c:p:18-27 is not listed on IDEAS
    5. Wiser, Ryan & Bolinger, Mark & Heath, Garvin & Keyser, David & Lantz, Eric & Macknick, Jordan & Mai, Trieu & Millstein, Dev, 2016. "Long-term implications of sustained wind power growth in the United States: Potential benefits and secondary impacts," Applied Energy, Elsevier, vol. 179(C), pages 146-158.
    6. Donald N. Dewees, 2013. "The Economics of Renewable Electricity Policy in Ontario," Working Papers tecipa-478, University of Toronto, Department of Economics.
    7. Schmalensee, Richard, 2012. "From “Green Growth” to sound policies: An overview," Energy Economics, Elsevier, vol. 34(S1), pages 2-6.
    8. Sueyoshi, Toshiyuki & Goto, Mika, 2014. "Photovoltaic power stations in Germany and the United States: A comparative study by data envelopment analysis," Energy Economics, Elsevier, vol. 42(C), pages 271-288.

    More about this item

    Keywords

    Clean energy; Industrial policy; Technology policy; Climate change; Energy subsidy;

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • F18 - International Economics - - Trade - - - Trade and Environment

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