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Renewable energy policies in federal government systems

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  • Meya, Jasper N.
  • Neetzow, Paul

Abstract

Renewable energy (RE) policies are widely used to decarbonize power generation and implemented at various governance levels. We use an analytically tractable two-level model to study the effects of overlapping RE policies from the federal and state governments. We find that there are contrasting incentives for states to support RE deployment, depending on whether the federal government implements a feed-in tariff (FIT) or an auction system. Under federal FIT, states that bear a greater burden in financing the federal policy under-subsidize RE in order to reduce nationwide RE deployment and thereby lower their costs. Under federal auction, states that bear a greater burden to finance federal policy over-subsidize RE to drive down the quota price, and thereby also their costs. In an application to Germany, we illustrate that the recent shift from FIT to auctions increases incentives for state governments to support RE in the demand-intensive south, while decreasing them in the wind-abundant north.

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  • Meya, Jasper N. & Neetzow, Paul, 2021. "Renewable energy policies in federal government systems," Energy Economics, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:eneeco:v:101:y:2021:i:c:s0140988321003455
    DOI: 10.1016/j.eneco.2021.105459
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    More about this item

    Keywords

    Auction; Feed-in tariff; Multi-level governance; Fiscal federalism; Overlapping regulation; Energy transition;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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