Strategic technology policy as a supplement to renewable energy standards

Fischer Fischer, Mads Greaker and Knut Einar Rosendahl

No 01-2016, Working Paper Series from Norwegian University of Life Sciences, School of Economics and Business

Abstract: In many regions, renewable energy targets are a primary decarbonization policy. Most of the same jurisdictions also subsidize the manufacturing and/or deployment of renewable energy technologies, some being su¢ ciently aggressive as to engender WTO disputes. We consider a downstream energy-using prod- uct produced competitively but not traded across regions, such as electricity or transportation. A renewable energy technology is available, provided by a limited set of upstream suppliers who exercise market power. With multiple market fail- ures (emissions externality and imperfect competition), renewable market share targets as the binding climate policy, and international trade in equipment, the stage is set to examine rationales for green industrial policy. Subsidies may be provided downstream to energy suppliers and/or upstream to technology sup- pliers; each has tradeo¤s. Subsidies can o¤set underprovision upstream, but they allow dirty generation to expand when the portfolio standard becomes less binding. Downstream subsidies raise all upstream pro…ts and crowd out foreign emissions. Upstream subsidies increase domestic upstream market share but expand emissions globally. In our two-region model, strategic subsidies chosen noncooperatively can be optimal from a global perspective, if both regions value emissions at the global cost of carbon. But if the regions su¢ ciently undervalue global emissions, restricting the use of upstream subsidies can enhance welfare.

Keywords: Strategic technology policy; Renewable energy standard; Upstream technology market (search for similar items in EconPapers)
JEL-codes: H23 L13 Q54 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2016-01-11
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Strategic technology policy as a supplement to renewable energy standards (2018)
Working Paper: Strategic Technology Policy as a Supplement to Renewable Energy Standards (2016)
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