Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76121
Authors: 
Madlener, Reinhard
Neustadt, Ilja
Year of Publication: 
2010
Series/Report no.: 
Working Paper, Socioeconomic Institute, University of Zurich 1010
Abstract: 
In a perfectly competitive market with a possibility of technological innovation we contrast guaranteed feed-in tariffs for electricity from renewables and tradable green certificates from a dynamic efficiency and social welfare point of view. Specifically, we model decisions about the technological innovation with convex costs within the framework of a game-theoretic model, and discuss implications for optimal policy design under different assumptions regarding regulatory pre-commitment. We find that for the case of technological innovation with convex costs subsidy policies are preferable over quota-based policies. Further, in terms of dynamic efficiency, no pre-commitment policies are shown to be at least as good as the pre-commitment ones. Thus, a government with a preference for innovation being performed if the achievable cost reduction is high should be in favor of the no pre-commitment regime.
Subjects: 
Renewable electricity
Feed-in tariffs
Regulatory pre-commitment
Tradable green certificates
Quota target
Innovation
Energy policy
JEL: 
Q42
Q48
Document Type: 
Working Paper

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