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Effects of Consumer Subsidies for Renewable Energy on Industry Growth and Welfare: Japanese Solar Energy

Satoshi Myojo and Hiroshi Ohashi ()
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Satoshi Myojo: Faculty of Economics, Hosei University

No CIRJE-F-925, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract:    This paper examines the effectiveness of consumer subsidies to encourage the installment of solar panels in Japan. Such subsidies can be justified on the ground that the prices to consumers of the conventional energy alternative do not reflect their full social costs. The paper investigates two types of subsidies: buy-back rebates and feed-in tariffs. Estimates reveals modest demand elasticity and small learning effect. Simulations, based on structural demand and supply estimates, indicate that the subsidies can have either beneficial or detrimental effects on social welfare. The paper concludes that the impacts of the subsidies critically rely on the cost structure and the magnitude of external costs arising from greenhouse emissions.

Pages: 28 pages
Date: 2014-03
New Economics Papers: this item is included in nep-ene, nep-env and nep-ger
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Handle: RePEc:tky:fseres:2014cf925