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Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-51792

Madlener, Reinhard; Neustadt, Ilja (2010). Renewable energy policy in the presence of innovation: does government pre-commitment matter? Working paper series / Socioeconomic Institute No. 1010, University of Zurich.

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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.

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Socioeconomic Institute (former)
DDC:330 Economics
JEL Classification:Q42, Q48
Language:English
Date:September 2010
Deposited On:29 Nov 2011 15:09
Last Modified:09 Jul 2012 05:00
Series Name:Working paper series / Socioeconomic Institute
Official URL:http://www.econ.uzh.ch/wp.html

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