Template-Type: ReDIF-Article 1.0
Author-Name:  Richard Duke 
Author-Name:  Daniel M. Kammen
Title:  The Economics of Energy Market Transformation Programs
Classification-JEL: F0
Pages:  15-64
Volume:  Volume20
Issue:  Number 4
Year:  1999
Abstract:  This paper evaluates three energy-sector market transformation programs: the U.S. Environmental Protection Agency's Green Lights program to promote on-grid efficient lighting; the World Bank Group's new Photovoltaic Market Transformation Initiative; and the federal grain ethanol subsidy. We develop a benefit-cost model that uses experience curves to estimate unit cost reductions as a function of cumulative production. Accounting for dynamic feedback between the demand response and price reductions from production experience raises the benefit-cost ratio (BCR) of the first two programs substantially. The BCR of the ethanol program, however, is approximately zero, illustrating a technology for which subsidization was not justified. Our results support a broader role for market transformation programs to commercialize new environmentally attractive technologies, but the ethanol experience suggests moderately funding a broad portfolio composed of technologies that meet strict selection criteria.
Handle: RePEc:aen:journl:1999v20-04-a02
File-URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=1323
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