The Economics of Policy Instruments to Stimulate Wind Power in Brazil

19 Pages Posted: 20 Apr 2016

See all articles by Florian Landis

Florian Landis

ZEW – Leibniz Centre for European Economic Research

Govinda R. Timilsina

World Bank - Development Research Group (DECRG)

Date Written: June 30, 2015

Abstract

Large-scale deployment of renewable energy technologies, such as wind power and solar energy, has been taking place in industrialized and developing economics mainly because of various fiscal and regulatory policies. An understanding of the economy-wide impacts of those policies is an important part of an overall analysis of them. Using a perfect foresight computable general equilibrium model, this study analyzes the economy-wide costs of achieving a 10 percent share of wind power in Brazil?s electricity supply mix by 2030. Brazil is in the midst of an active program of wind capacity expansion. The welfare loss would be small, 0.1 percent of total baseline welfare in the absence of the 10 percent wind power expansion. The study also finds that, in the case of Brazil, production subsidies financed through increased value-added tax would have superior impacts on welfare and greenhouse gas mitigation, compared with a consumption mandate where electricity utilities are allowed to pass the increased electricity supply costs directly to consumers. These two policies would impact various production sectors differently to achieve the wind power expansion targets: the burden of the mandate falls mostly on electricity-intensive production and consumption, whereas the burden of the subsidy is distributed toward goods and services with higher value added.

Keywords: Regulatory Regimes, Legal Products, Judicial System Reform, Renewable Energy, Climate Change and Health, Legislation, Legal Reform, Rural and Renewable Energy, Science of Climate Change, Climate Change and Environment, Social Policy, Industrial Management

Suggested Citation

Landis, Florian and Timilsina, Govinda R., The Economics of Policy Instruments to Stimulate Wind Power in Brazil (June 30, 2015). World Bank Policy Research Working Paper No. 7346. Available at SSRN: https://ssrn.com/abstract=2625334

Florian Landis (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Govinda R. Timilsina

World Bank - Development Research Group (DECRG) ( email )

1818 H Street NW
MSN3-311
Washington, DC 20433
United States

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