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 2015.106, Working Papers from Fondazione Eni Enrico Mattei

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: Second-best; Climate Policy; Energy Policy; Feed-in tariff; Power Sector; EU (search for similar items in EconPapers)
JEL-codes: C61 O33 Q48 Q54 Q55 (search for similar items in EconPapers)
Date: 2015-10
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-reg
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Related works:
Working Paper: Second-Best Analysis of European Energy Policy: Is One Bird in the Hand Worth Two in the Bush? (2016)
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:fem:femwpa:2015.106

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