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Climate policies with pollution externalities and learning spillovers

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  • Lehmann, Paul

Abstract

Economic theory suggests that with a pollution externality and learning spillovers related to renewable energy technologies, the optimal climate policy mix includes an emissions policy and an output subsidy to the learning industry. Instead of output subsidies, feed-in tariffs are often implemented in addition to emissions policies. This paper reveals that this policy mix may theoretically provide for a first-best outcome as well. However, its efficient design may be cumbersome for regulators. An emissions tax must be below the Pigovian level and differentiate between fossil fuels. Moreover, both tax and feed-in tariff must be adapted continuously.

Suggested Citation

  • Lehmann, Paul, 2009. "Climate policies with pollution externalities and learning spillovers," UFZ Discussion Papers 10/2009, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
  • Handle: RePEc:zbw:ufzdps:102009
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    References listed on IDEAS

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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. Lehmann, Paul & Gawel, Erik, 2013. "Why should support schemes for renewable electricity complement the EU emissions trading scheme?," Energy Policy, Elsevier, vol. 52(C), pages 597-607.
    3. Eichner, Thomas & Pethig, Rüdiger, 2014. "International carbon emissions trading and strategic incentives to subsidize green energy," Resource and Energy Economics, Elsevier, vol. 36(2), pages 469-486.
    4. Joan Canton & Åsa Johannesson Lindén, 2010. "Support schemes for renewable electricity in the EU," European Economy - Economic Papers 2008 - 2015 408, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    More about this item

    Keywords

    Emissions tax; feed-in tariffs; policy mix; spillovers; learning by doing;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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