•We investigate dynamic scrappage subsidies in the presence of strategic consumers.•The future subsidy level is higher than the current subsidy level.•Subsidy levels depend on government’s targeted ...replacement level.•Government might be better off changing the program’s eligibility age.
Many countries have introduced vehicle scrappage programs to motivate consumers to replace their old cars earlier. Since these programs are generally offered over a given period of time, policy makers need to plan for inter-temporal subsidies. Considering a two-period game between strategic consumers and the government, we determine the optimal scrappage subsidy levels. Our results demonstrate that the subsidy level in the second period is higher than in the first, allowing the government to discriminate on price (or subsidy) between consumers with different valuations. In addition, we show that subsidy levels increase with the government’s targeted replacement level. However, when the government target level changes from intermediate to high, the first-period subsidy drops while the second-period subsidy remains unchanged.
Distributed renewable energy sources (D-RES) are growing, transforming electricity consumers into producer–consumers (“prosumers”). Retail electricity tariffs require new mechanisms to fairly ...purchase D-RES generation from and transfer costs to prosumers. Otherwise, cross-subsidy (wealth transfers from some prosumers to others) can worsen tariff outcomes. Tariffs depend on metering infrastructure, where two choices can significantly impact cross-subsidies: (a) metering generation and consumption separately, and (b) using advanced metering infrastructure (AMI) that allows for more granular accounting of energy trade. We use high-resolution energy data from 2016 from Austin, TX, USA, to study these impacts in a high-D-RES distribution grid. We consider multiple tariffs and metering scenarios, thus separating their effects. We find that traditional tariffs using legacy metering create median annual cross-subsidy values from 38% to 100% of real costs. However, AMI can reduce these values by 2 to 3 orders of magnitude when a tariff that utilizes AMI’s options is used. In contrast, metering generation separately from consumption appears to have little impact on cross-subsidies. Our results have implications for metering infrastructure choices and tariff design for grids undergoing rapid growth of D-RES generation.
•Installing smart meters (AMI) in a high D-RES grid improves electricity tariff fairness.•These effects depend on choosing a suitable tariff that utilizes AMI data resolution.•Measuring D-RES generation and consumption separately has little impact on fairness.•Realistic demand elasticity rates have negligible impact on tariff fairness.
Understanding the heterogeneity and influencing factors of renewable energy investment between enterprises can help to evaluate existing policies and provide guidance for future subsidy policies. ...This paper investigates how the relationship between government subsidies and renewable energy investment depends on enterprise size and relaxes the linear relationship in the traditional empirical model. Based on firm-level panel data from China, only when the enterprise size exceeds a certain threshold value can it have a significant effect. The effect of government subsidies on renewable energy investment is on the rise. However, its speed tends to decrease with the growth of enterprise size. Besides, ownership concentration and enterprise growth significantly promote investment in renewable energy. The empirical results show that the effect of government subsidies has a significant enhancement in 2016, which may be due to high frequency and high government subsidies in the early stage. These findings are robustly verified. Finally, some specific policy suggestions are put forward.
•A partial linear function coefficient model is used for analysis.•Government subsidies have a positive effect on renewable energy investment.•The effect of enterprise size on renewable energy investment is nonlinear.•Ownership concentration and enterprise growth promote renewable energy investment.
•Government might prefer to adopt the green R&D subsidy in the presence of public firm under certain conditions.•Privatization policy reduces the emission tax whereas reduces (increases) the green ...R&D subsidy with low (high) R&D cost.•Government should adopt the green R&D subsidy and keep the public firm under the lower R&D cost.•Government should adopt the emission tax and determine privatization depending on R&D spillovers, when R&D cost is high.
In this article, we compare two kinds of environmental regulations—emissions taxes and green R&D subsidies—in private and mixed-duopoly markets in the presence of R&D spillovers. We show that a green R&D subsidy is better (worse) than an emissions tax when the green R&D is efficient (inefficient), irrespective of R&D spillovers, whereas the existence of a publicly owned firm encourages the government to adopt a subsidy policy. We also show that the optimal policy choice depends on R&D efficiency and spillovers. In particular, when green R&D is inefficient and the spillover rate is low (high), the government should choose an emissions tax and (not) privatize the state-owned firm. When green R&D is efficient, however, an R&D subsidy is better, but a privatization policy is not desirable for society, irrespective of spillovers.
Since the metallurgical industry has become the main source of China's carbon dioxide emissions and energy consumption in recent years, low-carbon transition in that industry is of great significance ...for achieving China's carbon reduction targets. It is generally believed that phasing out fossil fuel subsidies is an effective way to reduce energy-related CO2 emissions since it can increase the energy prices and lower its consumption. This paper aims to investigate whether the energy subsidy removal can promote the low-carbon transition of China's metallurgical industry. Taking inter-fuel and inter-factor substitution effects as the link, we calculate the CO2 mitigation potential on the assumption that the subsidies for each category of fossil energy were eliminated. We find that the metallurgical industry has a sluggish reaction to the changes in energy price. Supposing eliminating the energy subsidies in the period of 2003–2015, the amount of reduced CO2 would be 487.286 million tons, accounting for a slight proportion of the total emissions in the industry. But it is meaningful for the global CO2 mitigation since it approximates the whole CO2 emissions in Norway during the same period. These findings can provide some new insights for the energy subsidy issue and suggest that the additional measures are required to promote the low-carbon transition in China's metallurgical industry rather than just relying on the removal of fossil fuel subsidies.
•The scale of fossil fuel subsidies in China's metallurgical industry is measured.•The trans-log cost function is adopted to uncover the inter-fuel substitution.•Low-carbon transition cannot be realized only by removing fossil fuel subsidies.
In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries.
Energy demand for residential heating is targeted in France by a number of subsidy programmes (tax credits, zero-interest loans, reduced VAT, white certificates) and the carbon tax. We assess the ...cost-effectiveness and distributional impacts of these policies using Res-IRF, an energy-economy model that integrates relevant economic, behavioural and technological processes. We find that, without further specification of revenue recycling, the carbon tax is the most effective, yet most regressive, policy. Subsidy programmes save energy at a cost of €0.05–0.08 per lifetime discounted kilowatt-hour, or €300–800/tCO2-eq; one euro of public money spent on subsidy programmes induces €1.0–1.4 private investment in home energy retrofits. Targeting subsidies towards low-income households, who tend to live in energy inefficient dwellings, increases leverage, thus reconciling economic efficiency and equity. The public cost of subsidies – €3 billion in 2013 – is outweighed by carbon tax proceeds from 2025 onwards, were the tax rate to grow as initially planned by the government. Meeting the long-term energy saving targets set by the government however requires adjusting subsidy programmes to better address rental housing. Lastly, an order-of-magnitude discrepancy between simulated and observed numbers of zero-interest loans points to economic and psychological barriers that require further investigation.
•Economic, environmental and distributional impact of French residential policies.•Focus on tax credits, zero-interest loans, white certificates and the carbon tax.•Carbon tax most effective, yet most regressive when recycling left unspecified.•Leverage higher when subsidies are targeted towards low-income households.•Hardly any policy effectively tackles the stock of rental housing.
This paper studies government subsidies for green technology adoption while considering the manufacturing industry’s response. Government subsidies offered directly to consumers impact the supplier’s ...production and pricing decisions. Our analysis expands the current understanding of the price-setting newsvendor model, incorporating the external influence from the government, who is now an additional player in the system. We quantify how demand uncertainty impacts the various players (government, industry, and consumers) when designing policies. We further show that, for convex demand functions, an increase in demand uncertainty leads to higher production quantities and lower prices, resulting in lower profits for the supplier. With this in mind, one could expect consumer surplus to increase with uncertainty. In fact, we show that this is not always the case and that the uncertainty impact on consumer surplus depends on the trade-off between lower prices and the possibility of underserving customers with high valuations. We also show that when policy makers such as governments ignore demand uncertainty when designing consumer subsidies, they can significantly miss the desired adoption target level. From a coordination perspective, we demonstrate that the decentralized decisions are also optimal for a central planner managing jointly the supplier and the government. As a result, subsidies provide a coordination mechanism.
This paper was accepted by Yossi Aviv, operations management
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The aim of this paper is to provide an updated estimate of global fisheries subsidies. It builds on earlier estimates and methodologies to re-estimate and discuss the various types of subsidies ...provided by governments around the world. The results suggests that total subsidies were about USD 35 billion in 2009 dollars, which is close to the earlier estimate of 2003 subsidies once they are adjusted for inflation. Capacity-enhancing subsidies constituted the highest category at over USD 20 billion. For all regions, the amount of capacity-enhancing subsidies is higher than other categories, except for North America, which has higher beneficial subsidies. The analysis reveals that fuel subsidies constitute the greatest part of the total subsidy (22% of the total), followed by subsidies for management (20% of the total) and ports and harbors (10% of the total). Subsidies provided by developed countries are far greater (65% of the total) than those by developing countries (35% of the total) even though the latter lands well above 50% of total global catch. Asia is by far the greatest subsidizing region (43% of total), followed by Europe (25% of total) and North America (16% of total). Japan provides the highest amount of subsidies (19.7% of total), followed by the United States and China at 19.6% of total.
•Global fisheries subsidies were estimated at about USD 35 billion in 2009 dollars.•Harmful subsidies constituted the highest categories provided at over $ 20 billion.•Harmful subsidies are highest category in all regions except North America.•Fuel subsidies are largest of the total subsidy at 22%.•Subsidies contributed by developed countries are 65% of the total.
Empirical evidence suggests that carbon taxes are best accepted when their revenue is used to finance abatement measures. This revenue recycling option has however received little attention in ...modelling assessments. With the aim of filling this gap, we assess the impact of the French carbon tax on energy use for residential heating and compare the cost-effectiveness and distributional impacts of two revenue recycling options: lump-sum payment and subsidies for home energy retrofits. We do so using Res-IRF, an energy-economy model that provides a highly detailed description of housing features (single vs. multi-family, energy efficiency, heating fuel) and key household characteristics (tenancy status, income). We find that the two recycling options offset the regressive impacts of the tax in comparable ways. Lump-sum recycling is particularly effective in reducing inequalities between owner-occupiers and tenants. In turn, subsidy recycling saves energy and increases comfort more cost-effectively. In the discussion, we further point to some advantages of subsidy recycling from both a political and administrative perspective.
•Recycling carbon tax revenue as energy efficiency subsidies is little studied, despite receiving strong consumer support.•We compare this revenue-recycling option to lump-sum payments in the French residential sector.•We find lump-sum recycling to be particularly effective in reducing inequalities between owner-occupiers and tenants.•In turn, subsidy recycling saves energy and increases comfort more cost-effectively.•In the discussion, we argue that subsidy recycling has advantages from both a political and administrative perspective.
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