The Effectiveness of Taxation and Feed-in Tariffs

Fabio Antoniou and Roland Strausz

No 4788, CESifo Working Paper Series from CESifo

Abstract: We study (energy) markets with dirty incumbents and costly entry by clean producers. For intermediate entry costs, the market outcome exhibits inefficient production and inefficient entry. A policy mix of three popular regulatory instruments—taxation on polluters, feed-in tariffs for clean entrants, and taxation of consumption—cannot correct these two market failures. Feed-in tariffs and consumption taxes are ineffective instruments for implementing the first best. The second best requires feed-in tariffs or consumption taxes. For a given level of production, the instruments are ineffective in influencing the overall budget, but may be effective for other budgetary concepts.

Keywords: taxation; feed-in tariffs; externalities; entry; pollution (search for similar items in EconPapers)
JEL-codes: D21 D61 H23 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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