Arbeitspapier

The Effectiveness of Taxation and Feed-in Tariffs

We study (energy) markets with dirty incumbents and costly entry by clean producers. For intermediate entry costs, the market outcome exhibits inefficient production and inefficient entry. A policy mix of three popular regulatory instruments—taxation on polluters, feed-in tariffs for clean entrants, and taxation of consumption—cannot correct these two market failures. Feed-in tariffs and consumption taxes are ineffective instruments for implementing the first best. The second best requires feed-in tariffs or consumption taxes. For a given level of production, the instruments are ineffective in influencing the overall budget, but may be effective for other budgetary concepts.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 4788

Classification
Wirtschaft
Firm Behavior: Theory
Allocative Efficiency; Cost-Benefit Analysis
Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Subject
taxation
feed-in tariffs
externalities
entry
pollution

Event
Geistige Schöpfung
(who)
Antoniou, Fabio
Strausz, Roland
Event
Veröffentlichung
(who)
Center for Economic Studies and ifo Institute (CESifo)
(where)
Munich
(when)
2014

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Antoniou, Fabio
  • Strausz, Roland
  • Center for Economic Studies and ifo Institute (CESifo)

Time of origin

  • 2014

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