AW: subsidies for renewable energies and the environment
Sorry about my bad english skills, but in germany I have not so much opportunities to speak english. "Exquilibrium" means simply equilibrium. A complete exploitation of exhaustable ressources takes place (in theory), if marginal user costs and marginal exploitation costs (ressource price) achieve marginal costs of back-stop-technologie (exploitation of renewables). Steffen > I think that this could only be if subsidies payed up to the exquilibrium > price of all exhaustable ressources. But this is not the case. Only a small > part of renewable energies gets subsidies and this not in all countries. > This implicates only a slow progress of back-stop-technologies and a > reduction of exquilibrium prices for exhaustible ressources. The theory of > exhaustible ressources predicts a lowering of marginal user costs and a > extraction path that cause a complete exploitation if marginal costs of > renewable will reached. I don't completely understand this paragraph since several sentences don't seem to make sense. (What is "exquilibrium"? Is that a typo of equilibrium? What does "marginal costs of renewable will be reached" mean? Reached by what?) >From what I can figure out, a subsidy on renewable resources has two effects. One, it reduces the total amount of exhaustable resources extracted over all time. Two, it shifts some of the remaining extraction closer in time to the present. So it's not clear that the subsidy is beneficial overall. Is that what you mean?
Re: subsidies for renewable energies and the environment
On Fri, Nov 16, 2001 at 10:31:22AM +0100, Hentrich, Steffen wrote: > I think that this could only be if subsidies payed up to the exquilibrium > price of all exhaustable ressources. But this is not the case. Only a small > part of renewable energies gets subsidies and this not in all countries. > This implicates only a slow progress of back-stop-technologies and a > reduction of exquilibrium prices for exhaustible ressources. The theory of > exhaustible ressources predicts a lowering of marginal user costs and a > extraction path that cause a complete exploitation if marginal costs of > renewable will reached. I don't completely understand this paragraph since several sentences don't seem to make sense. (What is "exquilibrium"? Is that a typo of equilibrium? What does "marginal costs of renewable will be reached" mean? Reached by what?) >From what I can figure out, a subsidy on renewable resources has two effects. One, it reduces the total amount of exhaustable resources extracted over all time. Two, it shifts some of the remaining extraction closer in time to the present. So it's not clear that the subsidy is beneficial overall. Is that what you mean?
AW: subsidies for renewable energies and the environment
>How did you arrive at this conclusion? It seems to me that if you lower >the cost of renewable resources, that will result in less exhaustable >resources being extracted, since some of the exhaustable resources that >could previously be extracted profitably would now remain in the ground. I think that this could only be if subsidies payed up to the exquilibrium price of all exhaustable ressources. But this is not the case. Only a small part of renewable energies gets subsidies and this not in all countries. This implicates only a slow progress of back-stop-technologies and a reduction of exquilibrium prices for exhaustible ressources. The theory of exhaustible ressources predicts a lowering of marginal user costs and a extraction path that cause a complete exploitation if marginal costs of renewable will reached. >Clearly that's the ideal policy, but if it's not possible to have >polluters pay the social cost (which is sometimes the case), is it a good >idea to subsidize less-polluting alternatives? Since that can reduce >the total amount of pollution, I think the answer is yes, as long as the >cost of the subsidies is lower than the benefit of reduced pollution. Indeed subsidies can be equivalent solution to the polluter pay principle. This depends on what is the cheapest way to prevent pollution (Coase). But I think, that this is not the point here. If you want to prevent pollution the best way is to tax or subsidies pollution, not oil or clean technologies. Steffen
Re: subsidies for renewable energies and the environment
On Sun, Nov 11, 2001 at 09:28:15PM +0100, Hentrich, Steffen wrote: > Nearly all countries run support policies for renewable energies to reduce > worldwide carbon dioxid emissions. But from resource economics point of view > sellers of exhaustible ressources will change to a new, lower price path if > they know prices of renewable resources (back.stop-technology). I'm with you so far. > Consequently > extraction and consumption of exhaustable resources accelerate. How did you arrive at this conclusion? It seems to me that if you lower the cost of renewable resources, that will result in less exhaustable resources being extracted, since some of the exhaustable resources that could previously be extracted profitably would now remain in the ground. Fred Foldvary wrote: > Generally, subsidies distort the allocation of resources. Pollution > imposes a social cost and if left uncompensated, is an implicit > subsidy. The optimal policy is therere to have polluters pay the > social cost (whether as a tax, negotiated fee, or tort restitution), > and leave the rest to the market, with no subsidies. Clearly that's the ideal policy, but if it's not possible to have polluters pay the social cost (which is sometimes the case), is it a good idea to subsidize less-polluting alternatives? Since that can reduce the total amount of pollution, I think the answer is yes, as long as the cost of the subsidies is lower than the benefit of reduced pollution.
Re: subsidies for renewable energies and the environment
I've often made the point that the main benefit of subsidies for renewable energy sources is to increase price competition on OPEC thereby resulting in lower oil prices and greater oil consumption. I like the irony. More generally, the economics of subsidizing a substitute for a monopolized product that you want *less of* is an excellent topic for research. The model I had in mind above is one where OPEC limit prices at the profit point of its substitutes. There are other ways of modeling how OPEC behaves, however, and its not obvious that prices fall under all of these. Taking for granted the wisdom of trying to increase renewable energy sources (I'm skeptical), I suspect that for a variety of reasons taxing the monopolized product is a much superior strategy to subsidizing the substitute. Alex -- Dr. Alexander Tabarrok Vice President and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621-1428 Tel. 510-632-1366, FAX: 510-568-6040 Email: [EMAIL PROTECTED]
AW: subsidies for renewable energies and the environment
Thatswhy my suggestiv question: Is there a sufficient reason for renewable energy subsidies? Steffen
