Competitive trilateral lobbying for and against subsidizing green energy

Rüdiger Pethig

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

Abstract: A small open economy operates a carbon emission trading scheme and subsidizes green energy. Taking cap-and-trade as given, we seek to explain the subsidy as the outcome of a trilateral tug of war between the ‘green’ energy industry, the ‘black’ energy industry and consumers. With parametric functions we fully solve the competitive economic equilibrium and the lobbying Nash equilibrium. We show how the resultant subsidy depends on the political influence of all three lobbying groups and we trace its determinants. Whether consumers have ‘green preferences’ turns out to be crucial for the results.

Keywords: green preferences; fossil fuel; green energy; green energy subsidy; cap-and-trade; overlapping regulation; competitive lobbying (search for similar items in EconPapers)
JEL-codes: D72 D78 H23 Q42 Q43 Q52 Q54 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2011
New Economics Papers: this item is included in nep-ene, nep-env, nep-pol and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:sie:siegen:150-11

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