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Technology-Neutral Versus Technology-Specific Procurement

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  • Natalia Fabra
  • Juan-Pablo Montero

Abstract

An imperfectly informed regulator needs to procure multiple units of some good (e.g., green energy, market liquidity, pollution reduction, land conservation) that can be produced with heterogeneous technologies at various costs. How should she optimally procure these units? Should she run technology-specific or technology-neutral auctions? Should she allow for partial separation across technologies? Should she instead post separate prices for each technology? What are the trade-offs involved? We find that one size does not fit all: the preferred instrument depends on the costs of the available technologies, their degree of substitutability, the extent of information asymmetry and the costs of public funds. We illustrate the use of our theory for policy analysis with an ex ante evaluation of Spain’s recent renewable auction.

Suggested Citation

  • Natalia Fabra & Juan-Pablo Montero, 2023. "Technology-Neutral Versus Technology-Specific Procurement," The Economic Journal, Royal Economic Society, vol. 133(650), pages 669-705.
    • Handle: RePEc:oup:econjl:v:133:y:2023:i:650:p:669-705.
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    Cited by:

    1. Mats Kröger, 2024. "Cream-skimming through PPAs – Interactions between Private and Public Long-term Contracts for Renewable Energy," Discussion Papers of DIW Berlin 2092, DIW Berlin, German Institute for Economic Research.
    2. Åsa Löfgren & Lassi Ahlvik & Inge den Bijgaart & Jessica Coria & Jūratė Jaraitė & Filip Johnsson & Johan Rootzén, 2024. "Green industrial policy for climate action in the basic materials industry," Climatic Change, Springer, vol. 177(9), pages 1-12, September.
    3. Ottmar Edenhofer & Max Franks & Matthias Kalkuhl & Artur Runge-Metzger, 2023. "On the Governance of Carbon Dioxide Removal – A Public Economics Perspective," CESifo Working Paper Series 10370, CESifo.
    4. Fabra, Natalia & Reguant, Mar, 2024. "The energy transition: A balancing act," Resource and Energy Economics, Elsevier, vol. 76(C).

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