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 15-079, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

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
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-reg
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https://www.econstor.eu/bitstream/10419/122189/1/839815395.pdf (application/pdf)

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:zbw:zewdip:15079

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