Date of This Version
1-26-2016
Abstract
This paper studies policy instruments that correct insufficient learning-by-doing (LbD) and research and development (R&D) of renewable electricity technologies and insufficient investments in energy efficiency (EE) in the presence of carbon pricing. The theoretical model analysis shows how to re-adjust the first-best in second-best situations, in which one of the policy instruments is restricted. Calibrated to the European power sector, the first-best choice of all instruments reduces the climate policy cost by one third. Feed-in tariffs turn out to be good substitutes for LbD, but not for R&D or EE subsidies.
Recommended Citation
Hübler, Michael; Schenker, Oliver; and Fischer, Carolyn, "Second-Best Analysis of European Energy Policy: Is One Bird in the Hand Worth Two in the Bush?" (January 26, 2016). Fondazione Eni Enrico Mattei Working Papers. Paper 975.
https://services.bepress.com/feem/paper975