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Climate policies with pollution externalities and learning spillovers

  • Lehmann, Paul

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.

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Paper provided by Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS) in its series UFZ Discussion Papers with number 10/2009.

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Date of creation: 2009
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Handle: RePEc:zbw:ufzdps:102009
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  4. Bläsi, Albrecht & Requate, Till, 2007. "Subsidies for Wind Power: Surfing down the Learning Curve?," Economics Working Papers 2007,28, Christian-Albrechts-University of Kiel, Department of Economics.
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  7. Bläsi, Albrecht & Requate, Till, 2005. "Learning-by-Doing with Spillovers in Competitive Industries, Free Entry, and Regulatory Policy," Economics Working Papers 2005,09, Christian-Albrechts-University of Kiel, Department of Economics.
  8. Isoard, Stephane & Soria, Antonio, 2001. "Technical change dynamics: evidence from the emerging renewable energy technologies," Energy Economics, Elsevier, vol. 23(6), pages 619-636, November.
  9. Neij, Lena, 1997. "Use of experience curves to analyse the prospects for diffusion and adoption of renewable energy technology," Energy Policy, Elsevier, vol. 25(13), pages 1099-1107, November.
  10. Fischer, Carolyn & Newell, Richard, 2004. "Environmental and Technology Policies for Climate Mitigation," Discussion Papers dp-04-05, Resources For the Future.
  11. Newell, Richard & Wilson, Nathan, 2005. "Technology Prizes for Climate Change Mitigation," Discussion Papers dp-05-33, Resources For the Future.
  12. Irwin, Douglas A & Klenow, Peter J, 1994. "Learning-by-Doing Spillovers in the Semiconductor Industry," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1200-1227, December.
  13. Menanteau, Philippe & Finon, Dominique & Lamy, Marie-Laure, 2003. "Prices versus quantities: choosing policies for promoting the development of renewable energy," Energy Policy, Elsevier, vol. 31(8), pages 799-812, June.
  14. Madlener, Reinhard & Stagl, Sigrid, 2005. "Sustainability-guided promotion of renewable electricity generation," Ecological Economics, Elsevier, vol. 53(2), pages 147-167, April.
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