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Competition in Electricity Markets with Renewable Energy Sources

Daron Acemoglu, Ali Kakhbod, and Asuman Ozdaglar
Authors registered in the RePEc Author Service: Daron Acemoglu

The Energy Journal, 2017, vol. Volume 38, issue KAPSARC Special Issue

Abstract: Despite increasing calls for reform many countries continue to provide subsidies for gasoline and diesel. This paper quantifies the external costs from global fuel subsidies using the latest available data and estimates from the World Bank and International Monetary Fund. Under preferred assumptions about supply and demand elasticities, current subsidies cause $44 billion in external costs annually. This includes $8 billion from carbon dioxide emissions, $7 billion from local pollutants, $12 billion from traffic congestion, and $17 billion from accidents. These external costs are in addition to conventional deadweight loss, estimated to be $26 billion annually. Government incentives for alternative fuel vehicles are unlikely to cost-effectively reduce these externalities as they do little to address traffic congestion or accidents and only indirectly address carbon dioxide and local pollutants.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2017
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