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

Joseph E. Aldy, Todd Gerarden and Richard L. Sweeney

Journal of the Association of Environmental and Resource Economists, 2023, vol. 10, issue 4, 981 - 1018

Abstract: This study examines the choice between subsidizing investment and subsidizing output to promote socially desirable production. We exploit a natural experiment to estimate the impact of subsidy margin on the productivity of wind farms. Using instrumental variable and matching estimators, we find that investment subsidy claimants produce 10%–12% less power than they would have under the output subsidy. Accounting for extensive margin effects, we show that output subsidies are more cost-effective than investment subsidies over a large range of output targets.

Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://dx.doi.org/10.1086/723142 (application/pdf)
http://dx.doi.org/10.1086/723142 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Investment versus Output Subsidies: Implications of Alternative Incentives for Wind Energy (2018)
Working Paper: Investment versus Output Subsidies: Implications of Alternative Incentives for Wind Energy (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jaerec:doi:10.1086/723142

Access Statistics for this article

More articles in Journal of the Association of Environmental and Resource Economists from University of Chicago Press
Bibliographic data for series maintained by Journals Division (pubtech@press.uchicago.edu).