Environmental Policy and Renewable Energy in an Imperfectly Competitive Market

Arbeitspapier

This paper analyses an electricity market in which a monopolist that employs fossil-fuel base-load and peak-load technologies competes against a fringe of renewable energy (RE) generators. The optimal technology and electricity mix can be decentralised by levying technology-dependent capacity taxes/subsidies in addition to technology-/state-dependent emission taxes. Whenever base-load capacity is taxed (subsidised), peak-load capacity is subsidised (taxed). A decline in RE capacity costs and an increase in the share of consumers on real-time prices predominantly raises emission taxes and brings them closer to their Pigouvian level, albeit with some qualifications. Capacity taxes/subsidies disappear when all consumers are on real-time prices and RE is about to fully crowd out conventional base-load capacity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10524

Classification and Topics

• Classification: Wirtschaft ; Alternative Energy Sources ; Energy: Government Policy ; Environmental Economics: Government Policy ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Oligopoly and Other Imperfect Markets
• Subject: intermittent renewable energy ; peak-load technology ; base-load technology ; emission tax ; capacity tax/subsidy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Haupt, Alexander
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/279274
• Last update: 10.03.2025, 11:43 AM CET