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A Decarbonization Strategy for the Electricity Sector: New-Source Subsidies

Kenneth C. Johnson


January 13, 2010

Energy Policy, Forthcoming

An expedient phase-out of carbon emissions in the electricity sector could be facilitated by imposing carbon fees and applying the revenue exclusively to subsidize new, low-carbon generation sources. Since there would initially be no "new sources," fees would be substantially zero at the outset of the program. Nevertheless, the program would immediately create high price incentives for low-carbon capacity expansion. Fees would increase as new, low-carbon sources gain market share, but price competition from a growing, subsidized clean-energy industry would help maintain moderate retail electricity prices. Subsidies would automatically phase out as emitting sources become obsolete.

Number of Pages in PDF File: 39

Keywords: Cap-and-trade, carbon tax, subsidy

JEL Classification: H21, O38, Q28, Q48

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Date posted: June 29, 2009 ; Last revised: January 22, 2010

Suggested Citation

Johnson, Kenneth C., A Decarbonization Strategy for the Electricity Sector: New-Source Subsidies (January 13, 2010). Energy Policy, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1427106

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Kenneth C. Johnson (Contact Author)
Independent ( email )
No Address Available
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