Second-Best Analysis of European Energy Policy: Is One Bird in the Hand Worth Two in the Bush?

Michael Hübler, Oliver Schenker and Carolyn Fischer

No 230918, Climate Change and Sustainable Development from Fondazione Eni Enrico Mattei (FEEM)

Abstract: This paper studies policy instruments that correct insufficient learning-by-doing (LbD) and research and development (R&D) of renewable electricity technologies and insufficient investments in energy efficiency (EE) in the presence of carbon pricing. The theoretical model analysis shows how to re-adjust the first-best in second-best situations, in which one of the policy instruments is restricted. Calibrated to the European power sector, the first-best choice of all instruments reduces the climate policy cost by one third. Feed-in tariffs turn out to be good substitutes for LbD, but not for R&D or EE subsidies.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 45
Date: 2016-02-08
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https://ageconsearch.umn.edu/record/230918/files/NDL2015-106.pdf (application/pdf)

Related works:
Working Paper: Second-Best Analysis of European Energy Policy: Is One Bird in the Hand Worth Two in the Bush? (2015)
Working Paper: Second-best analysis of European energy policy: Is one bird in the hand worth two in the bush? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemcl:230918

DOI: 10.22004/ag.econ.230918

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