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Title:Subsidies for learning in renewable energy technologies under market power and emission trading PDF Logo
Authors:Traber, Thure
Kemfert, Claudia
Issue Date:2011
Series/Report no.:Discussion papers // German Institute for Economic Research 1126
Abstract:Under perfect competition on the output market, first best technology subsidies in the presence of learning by doing are justified by knowledge spill overs that are not accounted for by individual companies. First best output subsidies are thus depending directly on the learning effects and are, if applicable, positive. Considering electricity markets, a setting of imperfect competition is more appropriate. We show that the second best output subsidy for learning by doing in renewable energies takes the market distortion due to imperfect competition into account and is of ambiguous sign. Based on simulations with a European electricity market model, we find that second best renewable energy subsidies are positive and only insignificantly impacted by market power. By contrast, the welfare gains from an optimal subsidy are considerably higher compared to a hypothetical situation of perfect competition.
Subjects:energy policy
renewable energy
learning by doing
imperfect competition
emission trading
JEL:L13
L94
O33
Q42
Document Type:Working Paper
Appears in Collections:DIW-Diskussionspapiere
Publikationen von Forscherinnen und Forschern des DIW

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