Subsidizing the Adoption of Energy-Saving Technologies: Analyzing the Impact of Uncertainty, Learning and Maturation

Tinbergen Institute Discussion Paper No. 2003-019/3

32 Pages Posted: 29 Jul 2003

See all articles by Henri L. F. de Groot

Henri L. F. de Groot

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Peter Mulder

VU University Amsterdam - Department of Spatial Economics

Daan van Soest

Tilburg University - CentER & Department of Economics

Date Written: March 2003

Abstract

As part of the Kyoto Protocol, many countries have committed themselves to substantially reduce the emission of greenhouse gases within a politically imposed time constraint. Investment subsidies can be an important instrument to stimulate the adoption of energy-saving technologies to achieve emission reduction targets. This paper addresses the impact of adoption subsidies on the amount of energy savings, taking into account endogeneity and uncertainty of technological progress. Neglecting these two characteristics of technological progress tends to result in overestimation of the short-run effectiveness of investment subsidies, whereas the effects on long-run effectiveness are ambiguous.

Keywords: energy efficiency, investing under uncertainty, subsidies, learning, investment timing

JEL Classification: Q40, O32

Suggested Citation

de Groot, Henri L.F. and Mulder, Peter and van Soest, Daan P., Subsidizing the Adoption of Energy-Saving Technologies: Analyzing the Impact of Uncertainty, Learning and Maturation (March 2003). Tinbergen Institute Discussion Paper No. 2003-019/3. Available at SSRN: https://ssrn.com/abstract=389300 or http://dx.doi.org/10.2139/ssrn.389300

Henri L.F. De Groot (Contact Author)

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands
+31 20 598 6168 (Phone)
+31 20 598 6004 (Fax)

Tinbergen Institute

Gustav Mahlerplein 17
Amsterdam, 1082 MS
Netherlands

Peter Mulder

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands
+31205982371 (Phone)

Daan P. Van Soest

Tilburg University - CentER & Department of Economics ( email )

P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 2072 (Phone)

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