Climate Policies with Pollution Externalities and Learning Spillovers

Lehmann, Paul (2009): Climate Policies with Pollution Externalities and Learning Spillovers.

Abstract

Economic theory suggests that with a pollution externality and learning spillovers related to renewable energy technologies, the optimal climate policy mix includes an emissions policy and an output subsidy to the learning industry. Instead of output subsidies, feed-in tariffs are often implemented in addition to emissions policies. This paper reveals that this policy mix may theoretically provide for a first-best outcome as well. However, its efficient design may be cumbersome for regulators. An emissions tax must be below the Pigovian level and differentiate between fossil fuels. Moreover, both tax and feed-in tariff must be adapted continuously.

• Item Type: MPRA Paper
• Language: English
• Keywords: emissions tax, feed-in tariffs, policy mix, spillovers, learning by doing
• Subjects: D - Microeconomics > D6 - Welfare Economics > D62 - Externalities; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy

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