Lobbying for and Against Subsidizing Green Energy

Thomas Eichner () and Rüdiger Pethig

Environmental & Resource Economics, 2015, vol. 62, issue 4, 925-947

Abstract: We consider a small open economy that operates a carbon emission trading scheme and subsidizes green energy. Taking cap-and-trade as given, we seek to explain the subsidy as the outcome of a trilateral tug of war between the green lobby, the brown lobby and the consumer lobby. With parametric functions we fully solve the competitive economic equilibrium and the lobbying Nash equilibrium. The rate of the green subsidy results from complementary or opposing political pressures of the three interest groups. If the brown lobby is stronger than the green one, our main results are (i) that the outcome of the three-party lobbying game is a green tax, if preferences are not green, and (ii) that green consumer preferences are necessary but not sufficient for generating a green subsidy in the lobbying game. Copyright Springer Science+Business Media Dordrecht 2015

Keywords: Green lobby; Brown lobby; Green subsidy; Green preferences; C72; F18; Q50; Q58 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10640-014-9852-2

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