Interaction of carbon reduction and green energy promotion in a small fossil-fuel importing economy

Rüdiger Pethig and Christian Wittlich

Volkswirtschaftliche Diskussionsbeiträge from Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht

Abstract: We study the incidence of carbon-reduction and green-energy promotion policies in a general equilibrium small open economy that depends on imports of fossil fuels. The focus is on mixed policies that are either price based (emissions taxes and producer price subsidies for green energy) or quantity based (schemes of trading emissions and green certificates). Policy instruments directed head-on toward promoting green energy are shown to also reduce carbon emissions and vice versa but the direct effects are stronger than the side effects, the more so, the greater is the elasticity of substitution in consumption between energy and consumption goods. We calculate the effects of variations in individual policy parameters on all endogenous variables, among them the energy price and the welfare costs. We also determine the impact of exogenous fossil-fuel price shocks on the economy.

Keywords: carbon reduction; green energy promotion; policy mix; interaction of policies (search for similar items in EconPapers)
JEL-codes: Q42 Q43 Q48 Q54 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2009
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Related works:
Working Paper: Interaction of Carbon Reduction and Green Energy Promotion in a Small Fossil-Fuel Importing Economy (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:sie:siegen:131-09

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