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Learning-by-Doing and the Optimal Solar Policy in California

Arthur van Benthem, Kenneth Gillingham and James Sweeney

Year: 2008
Volume: Volume 29
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No3-7
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Abstract:
Much policy attention has been given to promote fledgling energy technologies that promise to reduce our reliance on fossil fuels. These policies often aim to correct market failures, such as environmental externalities and learning�by-doing (LBD). We examine the implications of the assumption that LBD exists, quantifying the market failure due to LBD. We develop a model of technological advancement based on LBD and environmental market failures to examine the economically efficient level of subsidies in California�s solar photovoltaic market. Under central-case parameter estimates, including nonappropriable LBD, we find that maximizing net social benefits implies a solar subsidy schedule similar in magnitude to the recently implemented California Solar Initiative. This result holds for a wide range of LBD parameters. However, with no LBD, the subsidies cannot be justified by the environmental externality alone.



Fuelling Growth: What Drives Energy Demand in Developing Countries?

Arthur van Benthem and Mattia Romani

Year: 2009
Volume: Volume 30
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No3-5
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Abstract:
This paper investigates the relationship between energy demand, economic growth and prices in 24 non-OECD countries and three sectors from 1978 - 2003. We estimate linear and non-linear income and price elasticities, using time fixed effects to control for unobserved dynamic effects such as technological change. We also test for asymmetric responses to price changes. The analysis leads to the following conclusions. First, the income elasticity of energy demand is high and increases with income, both on the country and the sector level. Second, energy demand is more responsive to end-use price than international oil price changes. Third, the price elasticity of energy demand increases with the price level. This result, driven by the residential and agricultural sector, is new to the literature for developing countries, and is consistent with the hypothesis of stronger responsiveness to high energy prices. Finally, we find that after including time fixed effects, allowing for price asymmetry adds little to the results.





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