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Environmental and Technology Policy Options in the Electricity Sector: Interactions and Outcomes

Author

Listed:
  • Carolyn Fischer

    (Resources for the Future, Washington DC, Gothenburg University and CESifo Research Network, München)

  • Richard G. Newell

    (Duke University and National Bureau of Economic Research, Cambridge MA)

  • Louis Preonas

    (Resources for the Future, Washington DC and University of California, Berkeley)

Abstract

Myriad policy measures aim to reduce greenhouse gas emissions from the electricity sector, promote generation from renewable sources, and encourage energy conservation. To what extent do innovation and energy efficiency (EE) market failures justify additional interventions when a carbon price is in place? We extend the model of Fischer and Newell (2008) with advanced and conventional renewable energy technologies and short and long-run EE investments. We incorporate both knowledge spillovers and imperfections in the demand for energy efficiency. We conclude that some technology policies, particularly correcting R&D market failures, can be useful complements to emissions pricing, but ambitious renewable targets or subsidies seem unlikely to enhance welfare when placed alongside sufficient emissions pricing. The desirability of stringent EE policies is highly sensitive to the degree of undervaluation of EE by consumers, which also has implications for policies that tend to lower electricity prices Even with multiple market failures, emissions pricing remains the single most cost-effective option for reducing emissions

Suggested Citation

  • Carolyn Fischer & Richard G. Newell & Louis Preonas, 2014. "Environmental and Technology Policy Options in the Electricity Sector: Interactions and Outcomes," Working Papers 2014.67, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2014.67
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    References listed on IDEAS

    as
    1. Fischer, Carolyn & Newell, Richard G., 2008. "Environmental and technology policies for climate mitigation," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 142-162, March.
    2. Fischer, Carolyn & Preonas, Louis, 2010. "Combining Policies for Renewable Energy: Is the Whole Less Than the Sum of Its Parts?," International Review of Environmental and Resource Economics, now publishers, vol. 4(1), pages 51-92, June.
    3. Charles I. Jones & John C. Williams, 1998. "Measuring the Social Return to R&D," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1119-1135.
    4. Richard G. Newell, 2010. "The role of markets and policies in delivering innovation for climate change mitigation," Oxford Review of Economic Policy, Oxford University Press, vol. 26(2), pages 253-269, Summer.
    5. Zvi Griliches, 1998. "The Search for R&D Spillovers," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 251-268, National Bureau of Economic Research, Inc.
    6. Rüdiger Pethig & Christian Wittlich, 2009. "Interaction of Carbon Reduction and Green Energy Promotion in a Small Fossil-Fuel Importing Economy," CESifo Working Paper Series 2749, CESifo Group Munich.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Ibanez, Marcela & Blackman, Allen, 2015. "Environmental and Economic Impacts of Growing Certified Organic Coffee in Colombia," Discussion Papers dp-15-02, Resources For the Future.
    2. Mort Webster & Karen Fisher-Vanden & David Popp & Nidhi Santen, 2017. "Should We Give Up after Solyndra? Optimal Technology R&D Portfolios under Uncertainty," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(S1), pages 123-151.
    3. Steve Charnovitz & Carolyn Fischer, 2014. "Canada – Renewable Energy: Implications for WTO Law on Green and Not-so-Green Subsidies," Working Papers 2014.94, Fondazione Eni Enrico Mattei.
    4. Dallas Burtraw & Karen Palmer & Anthony Paul & Sophie Pan, 2015. "A Proximate Mirror: Greenhouse Gas Rules and Strategic Behavior Under the US Clean Air Act," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 217-241, October.
    5. Viktória Kocsis & Bert Hof, 2016. "Energy policy evaluation in practice: the case of production subsidies and DEN-B in the Netherlands," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 18(5), pages 1433-1455, October.
    6. Dechezlepretre, Antoine & Martin, Ralf & Mohnen, Myra, 2014. "Knowledge spillovers from clean and dirty technologies," LSE Research Online Documents on Economics 60501, London School of Economics and Political Science, LSE Library.
    7. Fox, Jacob & Axsen, Jonn & Jaccard, Mark, 2017. "Picking Winners: Modelling the Costs of Technology-specific Climate Policy in the U.S. Passenger Vehicle Sector," Ecological Economics, Elsevier, vol. 137(C), pages 133-147.
    8. Guillaume Bourgeois & Sandrine Mathy & Philippe Menanteau, 2017. "The effect of climate policies on renewable energies : a review of econometric studies
      [L’effet des politiques climatiques sur les énergies renouvelables : une revue des études économétriques]
      ," Post-Print hal-01585906, HAL.
    9. Mariana Mazzucato & Gregor Semieniuk, 2017. "Public financing of innovation: new questions," Oxford Review of Economic Policy, Oxford University Press, vol. 33(1), pages 24-48.

    More about this item

    Keywords

    Climate Change; Cap-and-Trade; Renewable Energy; Portfolio Standards; Subsidies; Spillovers; Energy Efficiency; Electricity;

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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