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Learning-by-Doing and the Optimal Solar Policy in California

Author

Listed:
  • Arthur van Benthem
  • Kenneth Gillingham
  • James Sweeney

Abstract

Much policy attention has been given to promote fledgling energy technologies that promise to reduce our reliance onfossilfuels. These policies often aim to correct market failures, such as environmental externalities and learning-by-doing (LBD). We examine the implications of the assumption that LBD exists, quantifying the market failure due to LBD. We develop a model of technological advancement based on LBD and environmental market failures to examine the economically efficient level of subsidies in California’s solar photovoltaic market. Under central-case parameter estimates, including nonappropriable LBD, we find that maximizing net social benefits implies a solar subsidy schedule similar in magnitude to the recently implemented California Solar Initiative. This result holds for a wide range of LBD parameters. However, with no LBD, the subsidies cannot be justified by the environmental externality alone.

Suggested Citation

  • Arthur van Benthem & Kenneth Gillingham & James Sweeney, 2008. "Learning-by-Doing and the Optimal Solar Policy in California," The Energy Journal, , vol. 29(3), pages 131-152, July.
    • Handle: RePEc:sae:enejou:v:29:y:2008:i:3:p:131-152
    DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No3-7
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    Cited by:

    1. Hsien-Long Huang & Li-Keng Cheng, 2023. "Predicting intention of residential solar installation: The role of ecological lifestyle, consumer innovativeness, perceived benefit, government incentives, and solar product knowledge," Energy & Environment, , vol. 34(6), pages 1826-1843, September.
    2. von Ditfurth, Jakob & Rausch, Sebastian, 2025. "How cost-effective were subsidies for solar energy in Germany?," ZEW Discussion Papers 25-018, ZEW - Leibniz Centre for European Economic Research.
    3. Scott, William A., 2025. "Cost and carbon-intensity reducing innovation in biofuels for road transportation," Energy Policy, Elsevier, vol. 197(C).
    4. Partnership for Market Readiness & International Carbon Action Partnership, 2016. "Emissions Trading in Practice," World Bank Publications - Reports 23874, The World Bank Group.
    5. Jansson, Evelina, 2025. "The impact of Electric Vehicle adoption on residential electricity consumption: Insights from Sweden," Energy Economics, Elsevier, vol. 152(C).
    6. Todd D. Gerarden, 2023. "Demanding Innovation: The Impact of Consumer Subsidies on Solar Panel Production Costs," Management Science, INFORMS, vol. 69(12), pages 7799-7820, December.
    7. Böning, Justus & Bruninx, Kenneth & Ovaere, Marten & Pepermans, Guido & Delarue, Erik, 2025. "The effectiveness of future financial benefits on PV adoption — Evidence from Belgium," Energy Economics, Elsevier, vol. 142(C).
    8. Lei Zhu & Junqi Liu & Qin Li & Yuan Xu, 2025. "Optimizing subsidy trajectory for carbon-mitigation technologies," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 30(4), pages 1-30, April.
    9. Eugenie Dugoua & Jacob Moscona, 2025. "The Economics of Climate Innovation: Technology, Climate Policy, and the Clean Energy Transition," CESifo Working Paper Series 12267, CESifo.
    10. Mathex, Simon & Hafkamp Ibanez, Lisette & Préget, Raphaële, 2025. "Behavioral rebound effect and moral compensation: An online experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 115(C).
    11. Eugenie Dugoua & Jacob Moscona, 2025. "The Economics of climate innovation: technology, climate policy, and the clean energy transition," CEP Discussion Papers dp2135, Centre for Economic Performance, LSE.

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