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International Carbon Emissions Trading and Strategic Incentives to Subsidize Green Energy

Author

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  • Thomas Eichner
  • Rüdiger Pethig

Abstract

This paper examines strategic incentives to subsidize green energy in a group of countries that operates an international carbon emissions trading scheme. Welfare-maximizing national governments have the option to discriminate against energy from fossil fuels by subsidizing green energy, although in our model green energy promotion is not efficiency enhancing. The cases of small and large countries turn out to exhibit significantly differences. While small countries refrain from subsidizing green energy and thus implement the efficient allocation, large permit-importing countries subsidize green energy in order to influence the permit price in their favor.

Suggested Citation

  • Thomas Eichner & Rüdiger Pethig, 2010. "International Carbon Emissions Trading and Strategic Incentives to Subsidize Green Energy," CESifo Working Paper Series 3083, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3083
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    References listed on IDEAS

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    6. Thomas Eichner & Rüdiger Pethig, 2015. "Efficient Management of Insecure Fossil Fuel Imports through Taxing Domestic Green Energy?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(5), pages 724-751, October.
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    Citations

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    Cited by:

    1. Eichner, Thomas & Runkel, Marco, 2014. "Subsidizing renewable energy under capital mobility," Journal of Public Economics, Elsevier, vol. 117(C), pages 50-59.
    2. Yu-Fu Chen & Michael Funke, 2010. "Global Warming And Extreme Events: Rethinking The Timing And Intensity Of Environmental Policy," Dundee Discussion Papers in Economics 236, Economic Studies, University of Dundee.
    3. van der Ploeg, Frederick & Withagen, Cees, 2012. "Is there really a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 342-363.
    4. Chang, Xiangyun & Xia, Haiyang & Zhu, Huiyun & Fan, Tijun & Zhao, Hongqing, 2015. "Production decisions in a hybrid manufacturing–remanufacturing system with carbon cap and trade mechanism," International Journal of Production Economics, Elsevier, vol. 162(C), pages 160-173.
    5. BRECHET, Thierry & PERALTA, Susana, 2012. "Markets for tradable emission permits with fiscal competition," CORE Discussion Papers 2012054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Gersbach, Hans & Hummel, Noemi, 2016. "A development-compatible refunding scheme for a climate treaty," Resource and Energy Economics, Elsevier, vol. 44(C), pages 139-168.
    7. Weitzel, Matthias, 2014. "Worse off from reduced cost? The role of policy design under uncertain technological advancement," Kiel Working Papers 1926, Kiel Institute for the World Economy (IfW).
    8. repec:eco:journ2:2017-02-23 is not listed on IDEAS
    9. Matthias Weitzel, 2017. "Who gains from technological advancement? The role of policy design when cost development for key abatement technologies is uncertain," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(1), pages 151-181, January.

    More about this item

    Keywords

    emissions trading; black energy; green energy; energy subsidies;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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