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The Intergenerational Incidence and Social Welfare of Renewable Energy Support Policies vs. Carbon Pricing

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  • Rausch, Sebastian
  • Yonezawa, Hidemichi

Abstract

This paper examines the lifetime and intergenerational economic incidence of renewable energy (RE) subsidies and carbon pricing for climate change mitigation, employing a calibrated dynamic general-equilibrium model with overlapping generations for the U.S. economy. We explore the political economy implications of the different regulatory approaches based on majority voting of generations alive at the time the policy is introduced. We emphasize issues for policy design focusing on the financing of RE subsidies and policy interactions with distortionary income taxation. Notwithstanding the supremacy of carbon pricing on grounds of aggregate efficiency, we find that smart designs for RE support policies, which link the _x000c_financing of the support for RE technologies to the carbon intensity of fossil-based energy technologies, constitute a politically viable option.

Suggested Citation

  • Rausch, Sebastian & Yonezawa, Hidemichi, 2019. "The Intergenerational Incidence and Social Welfare of Renewable Energy Support Policies vs. Carbon Pricing," Conference papers 333029, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333029
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    References listed on IDEAS

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    8. Lau, Morten I. & Pahlke, Andreas & Rutherford, Thomas F., 2002. "Approximating infinite-horizon models in a complementarity format: A primer in dynamic general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 26(4), pages 577-609, April.
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