Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/55297 
Year of Publication: 
2011
Series/Report no.: 
DIW Discussion Papers No. 1126
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
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

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.