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Strategic Technology Policy as a Supplement to Renewable Energy Standards

Author

Listed:
  • Carolyn Fischer
  • Mads Greaker
  • Knut Einar Rosendahl
Abstract
In many regions, renewable energy targets are a primary decarbonization policy. Most of the same jurisdictions also subsidize the manufacturing and/or deployment of renewable energy technologies, some being sufficiently aggressive as to engender WTO disputes. We consider a downstream energy-using product produced competitively but not traded across regions, such as electricity or transportation. A renewable energy technology is available, provided by a limited set of upstream suppliers who exercise market power. With multiple market failures (emissions externality and imperfect competition), renewable market share targets as the binding climate policy, and international trade in equipment, the stage is set to examine rationales for green industrial policy. Subsidies may be provided downstream to energy suppliers and/or upstream to technology suppliers; each has tradeoffs. Subsidies can offset underprovision upstream, but they allow dirty generation to expand when the portfolio standard becomes less binding. Downstream subsidies raise all upstream profits and crowd out foreign emissions. Upstream subsidies increase domestic upstream market share but expand emissions globally. In our two-region model, strategic subsidies chosen noncooperatively can be optimal from a global perspective, if both regions value emissions at the global cost of carbon. But if the regions sufficiently undervalue global emissions, restricting the use of upstream subsidies can enhance welfare.

Suggested Citation

  • Carolyn Fischer & Mads Greaker & Knut Einar Rosendahl, 2016. "Strategic Technology Policy as a Supplement to Renewable Energy Standards," CESifo Working Paper Series 5710, CESifo.
    • Handle: RePEc:ces:ceswps:_5710
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    References listed on IDEAS

    as
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    Cited by:

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    3. Rehman, Faheem Ur & Islam, Md. Monirul & Raza, Syed Ali, 2023. "Does disaggregate energy consumption matter to export sophistication and diversification in OECD countries? A robust panel model analysis," Renewable Energy, Elsevier, vol. 206(C), pages 274-284.
    4. Carolyn Fischer, 2017. "Environmental Protection for Sale: Strategic Green Industrial Policy and Climate Finance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 553-575, March.
    5. Gabriel E. Lade & C.-Y. Cynthia Lin Lawell, 2021. "The Design of Renewable Fuel Mandates and Cost Containment Mechanisms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(2), pages 213-247, June.
    6. Wang, Ying & Zhang, Dayong & Ji, Qiang & Shi, Xunpeng, 2020. "Regional renewable energy development in China: A multidimensional assessment," Renewable and Sustainable Energy Reviews, Elsevier, vol. 124(C).
    7. Sani Majumder & Izabela Nielsen & Susanta Maity & Subrata Saha, 2022. "Effect of Product Distribution Structures and Government Subsidy Measures on Product Quality and Consumption under Competition," Sustainability, MDPI, vol. 14(6), pages 1-24, March.
    8. Carolyn Fischer, 2016. "Strategic Subsidies for Green Goods," Working Papers 2016.30, Fondazione Eni Enrico Mattei.
    9. Alfredo Alcayde & Francisco G. Montoya & Raul Baños & Alberto-Jesús Perea-Moreno & Francisco Manzano-Agugliaro, 2018. "Analysis of Research Topics and Scientific Collaborations in Renewable Energy Using Community Detection," Sustainability, MDPI, vol. 10(12), pages 1-17, November.

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    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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