TY  - JOUR
ID  - iiasa13988
UR  - https://pure.iiasa.ac.at/id/eprint/13988/
IS  - 3
A1  - Rezai, A.
A1  - van der Ploeg, F.
N2  - Climate change must deal with two market failures: global warming and learning by doing in renewable energy production. The first-best policy consists of an aggressive renewables subsidy in the near term and a gradually rising and falling carbon tax. Given that global carbon taxes remain elusive, policy makers might have to rely on a second-best subsidy only. With credible commitment the second-best subsidy is higher than the social benefit of learning to cut the transition time and peak warming close to first-best levels at the cost of higher fossil fuel use in the short run (weak Green Paradox). Without commitment the second-best subsidy is set to the social benefit of learning. It generates smaller weak Green Paradox effects, but the transition to the carbon-free takes longer and cumulative carbon emissions are higher. Under first best and second best with pre-commitment peak warming is 2.1?2.3 ?C, under second best without commitment 3.5 ?C, and without any policy 5.1 ?C above pre-industrial levels. Not being able to commit yields a welfare loss of 95% of initial GDP compared to first best. Being able to commit brings this figure down to 7%.
VL  - 66
TI  - Second-Best Renewable Subsidies to De-carbonize the Economy: Commitment and the Green Paradox
AV  - public
EP  - 434
Y1  - 2017/03//
PB  - Springer Netherlands
JF  - Environmental and Resource Economics
KW  - First best; Second best; Commitment; Markov-perfect; Ramsey growth; Carbon tax; Renewables subsidy; Learning by doing; Directed technical change
SN  - 0924-6460
SP  - 409
ER  -