WEAI/AERE 2012 - Individual Paper Abstract
Title: Policy Pathways to a Viable Renewable Energy Sector
Author(s): Gordon RAUSSER,Department of Agricultural & Resource Economics, University of California, 207 Giannini Hall, #3310, Berkeley, CA 94720-3310, USA, 510-643-9952, 510-643-0287, rausser@berkeley.edu; Huayong Zhi, University of California, Berkeley; Thijs Vandemoortele, Katholieke Universiteit Leuven. [Photo credit: NREL photo eXchange #08000, by Warren Gretz]
Abstract:
All of the major countries are actively engaged in attempts to jump start their renewable energy industries. In the implementation of industrialization policies, a smorgasbord of policy instruments are currently used in a number of major countries. Little evidence shows the coordination among these instruments. In this paper, we evaluate the public sector policy instruments, both upstream and downstream, that generate incentives for the possible creation of a viably commercial renewable energy sector. A theoretical model is developed that isolates the effectiveness of public sector research and development policy instruments relative to downstream market-based incentives and subsidies for private sector R&D. Taking into account the coexistence of different technologies, the theoretical model will exhibit 1) how the optimal upstream R&D expenditures and downstream market-based incentives for private sector R&D depend on each other, 2) how the dependence is associate with knowledge spillover (Marshallian externalities), learning by doing, comparative advantage and governance structures, 3) how these factors affect the final energy matrix. In particular, the theoretical model will demonstrate that public sectors are handicapped by failing to set negative prices on carbon emissions.
Our theoretical model will be used as the framework for performing a comparative evaluation of the public sector approaches in a number of countries, including the United States, China, India, Brazil, and the EU. Each of these countries is pursuing a different public sector strategy. In the country-specific context (i.e., technology stocks, endowment, governance structure, etc.), we evaluate each of their strategies from the lens of our theoretical framework, emphasizing the potential complementarities between upstream R&D policy instruments and downstream market- based incentives. This evaluation incorporates each of the major emerging technologies: biofuels (biochemical, thermochemical), solar (thin-film PV, PV concentrators), hydrogen, fuel cell, wind and geothermal. Based on the evaluation, we will present preliminary attempts to forecast the final energy matrix in each of these countries.