Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/22044 
Year of Publication: 
2007
Series/Report no.: 
Economics Working Paper No. 2007-28
Publisher: 
Kiel University, Department of Economics, Kiel
Abstract: 
We develop a model with two types of electricity producers, fossil fuel utilities generating emissions, and suppliers of electricity from renewable resources such as wind energy. We account for the vertical structure of the wind-energy sector by considering wind-turbine producers engaged in learning by doing and selling their turbines to turbine operators. We show that in the absence of learning spillovers a first-best policy requires Pigouvian taxes only. We also study second-best optimal subsidies on electricity generated by wind power when (optimal) emission taxes are ruled out. We further investigate the impact of subsidies on prices, output, the number of firms, and environmental damage. It turns out that, in the case of purely private learning, secondbest optimal subsidies should only account for the environmental damage but are not necessary to spur learning.
Subjects: 
learning by doing
renewable energies
environmental policy
Pigouvian taxes
subsidies
feed-in tariffs
Document Type: 
Working Paper

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