Optimal Nonlinear Deployment Subsidies: Theory and Application to the German Solar Program

Stefan Pollinger ()
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Stefan Pollinger: ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper studies the optimal design of nonlinear subsidy schemes for deploying new technologies. Theoretically, it shows that nonlinearities can reduce the fiscal costs of such programs only if adopters' participation responses are heterogeneous along the subsidy schedule. Yet, early-stage technologies typically exhibit limited heterogeneity in this dimension. The insight generalizes to screening problems broadly, and in particular to multidimensional screening à la Rochet and Choné (1998). A quantitative analysis of the canonical German rooftop-solar program demonstrates the theoretical findings. In contrast to the celebrated Sadka-Seade "no-distortion-at-the-top" result, "no-distortion-atthe-bottom" emerges as an actionable policy prescription in this context.

Keywords: Second-Degree Price Discrimination; Deployment Subsidies; Extensive Margin (search for similar items in EconPapers)
Date: 2025-12-08
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-05407585v1
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