Details

Autor(en) / Beteiligte

• Eichner, Thomas
• Runkel, Marco

Titel

Subsidizing renewable energy under capital mobility

Ist Teil von

• Journal of public economics, 2014-09, Vol.117, p.50-59

Ort / Verlag

Elsevier B.V

Erscheinungsjahr

2014

Link zum Volltext

Quelle

Elsevier ScienceDirect Journals Complete

Beschreibungen/Notizen

• This paper provides a rationale for subsidizing green (renewable) energy production. Within a multi-country model where energy is produced with mobile capital in green and dirty production, we investigate the countries' decentralized choice of emissions taxes and green energy subsidies. Without green subsidies, the emissions tax is set inefficiently low, since each country ignores the environmental externality inflicted on other countries and since the emissions tax leads to a capital outflow to other countries. When the green subsidy is available, countries choose a positive subsidy rate since this reduces the overall distortion of the tax–subsidy system. In doing so, each country internalizes a larger part of the environmental externality. As a consequence capital is relocated from the dirty into the clean sectors and reduces global pollution. Hence, the subsidy is not only beneficial for the country which imposes it but also for all countries. •We analyze countries’ decentralized choice of emissions taxes and green subsidies.•Without the green subsidy the emissions tax is inefficiently low.•With the green subsidy the distortion of the tax-subsidy scheme is reduced.