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

Joseph Aldy, Todd Gerarden and Richard Sweeney

No 24378, NBER Working Papers from National Bureau of Economic Research, Inc

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 an output subsidy to estimate the impact of these policy instruments on productivity. Using instrumental variables and matching estimators, we find that wind farms claiming the investment subsidy produced 10 to 12 percent less power than wind farms claiming the output subsidy, and that this effect reflects subsidy incentives rather than selection. Introducing investment subsidies caused the Federal government to spend 14 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 and nep-reg
Note: EEE PE
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Citations: View citations in EconPapers (10)

Published as Joseph E. Aldy & Todd D. Gerarden & Richard L. Sweeney, 2023. "Investment versus Output Subsidies: Implications of Alternative Incentives for Wind Energy," Journal of the Association of Environmental and Resource Economists, vol 10(4), pages 981-1018.

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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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