Carbon Abatement with Renewables: Evaluating Wind and Solar Subsidies in Germany and Spain

49 Pages Posted: 10 Jan 2019

See all articles by Jan Abrell

Jan Abrell

ZEW – Leibniz Centre for European Economic Research - Environmental and Resource Economics, Environmental Management Research

Mirjam Kosch

ETH Zürich

Sebastian Rausch

ZEW – Leibniz Centre for European Economic Research; Heidelberg University - Alfred Weber Institute for Economics

Date Written: January 10, 2019

Abstract

This paper exploits the exogeneity of weather conditions to evaluate renewable energy (RE) subsidy programs in Germany and Spain in terms of their costs for reducing carbon dioxide emissions. We find that both the aggregate costs and the distribution of costs between energy producers and consumers vary significantly depending on which type of RE technology is promoted| - reflecting substantial heterogeneity in production costs, temporal availability of natural resources, and market conditions (i.e., time-varying demand, carbon intensity of installed production capacities, and opportunities for cross-border trade). We estimate that the costs for reducing one ton of CO2 emissions through subsidies for solar are e411-1'944. Subsidizing wind entails significantly lower costs, ranging from e82-276. While the economic rents for energy producers always decrease, consumers incur four to seven times larger costs when solar is promoted but gain under RE policies promoting wind.

JEL Classification: Q28, Q48, Q54, L94, C01

Suggested Citation

Abrell, Jan and Kosch, Mirjam and Rausch, Sebastian, Carbon Abatement with Renewables: Evaluating Wind and Solar Subsidies in Germany and Spain (January 10, 2019). USAEE Working Paper, Available at SSRN: https://ssrn.com/abstract=3313637 or http://dx.doi.org/10.2139/ssrn.3313637

Jan Abrell

ZEW – Leibniz Centre for European Economic Research - Environmental and Resource Economics, Environmental Management Research ( email )

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

Mirjam Kosch

ETH Zürich ( email )

Zürichbergstrasse 18
8092 Zurich, CH-1015
Switzerland

Sebastian Rausch (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

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

HOME PAGE: http://www.sebastianrausch.com

Heidelberg University - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
48
Abstract Views
395
PlumX Metrics