Investment versus Output Subsidies: Implications of Alternative Incentives for Wind Energy

Joseph Aldy, Todd Gerarden and Richard Sweeney

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: This paper examines the choice between subsidizing investment or output to promote socially desirable production. We exploit a natural experiment in which wind farm developers could choose an investment or output subsidy to estimate the impact of these instruments on productivity. Using regression discontinuity and matching estimators, we find that wind farms claiming the investment subsidy produced 10 to 11 percent less power than wind farms claiming the output subsidy, and that this effect reflects subsidy incentives rather than selection. The introduction of investment subsidies caused the Federal government to spend 12 percent more per unit of output from wind farms.

JEL-codes: H23 Q42 Q48 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-ene, nep-reg and nep-res
References: Add references at CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Investment versus Output Subsidies: Implications of Alternative Incentives for Wind Energy (2023)
Working Paper: Investment versus Output Subsidies: Implications of Alternative Incentives for Wind Energy (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:harjfk:rwp18-012

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