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Effects of Consumer Subsidies for Renewable Energy on Industry Growth and Welfare: Japanese Solar Energy

  • Satoshi Myojo

    (Faculty of Economics, Hosei University)

  • Hiroshi Ohashi

    (Faculty of Economics, the University of Tokyo)

   This paper examines the effectiveness of consumer subsidies to encourage the installment of solar panels in Japan. Such subsidies can be justified on the ground that the prices to consumers of the conventional energy alternative do not reflect their full social costs. The paper investigates two types of subsidies: buy-back rebates and feed-in tariffs. Estimates reveals modest demand elasticity and small learning effect. Simulations, based on structural demand and supply estimates, indicate that the subsidies can have either beneficial or detrimental effects on social welfare. The paper concludes that the impacts of the subsidies critically rely on the cost structure and the magnitude of external costs arising from greenhouse emissions.

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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-925.

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Length: 28 pages
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:tky:fseres:2014cf925
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  1. David Genesove & Wallace P. Mullin, 1998. "Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, 1890-1914," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 355-377, Summer.
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