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Subsidies, Standards and Energy Efficiency

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  • Jan Imhof

Abstract

Carbon taxes have been shown to be the most cost-effective instrument for carbon abatement in a second-best world characterized by non-energy-related market failures such as pre-existing taxes. We show, however, that both subsidies for energy efficiency improvements and fuel standards can be good policy instruments in a third-best world in which consumers underinvest in energy service capital. In this framework, subsidies and standards can both reduce emissions and increase welfare. We show additionally that still further emission reductions are attainable by combining these instruments with a CO2 tax. Two versions of a CGE model for Switzerland are used to compare five policy proposals. First, we examine the transitional impacts of the different policies using the dynamic CEPE model. The same policies are then implemented within a static representation of the model, which includes a bottom-up representation of light-duty vehicles and allows a more detailed examination of the role of fuel standards and subsidies for energy-efficient vehicles. doi: 10.5547/ISSN0195-6574-EJ-Vol32-SI1-8

Suggested Citation

  • Jan Imhof, 2011. "Subsidies, Standards and Energy Efficiency," The Energy Journal, , vol. 32(1_suppl), pages 129-152, June.
    • Handle: RePEc:sae:enejou:v:32:y:2011:i:1_suppl:p:129-152
    DOI: 10.5547/ISSN0195-6574-EJ-Vol32-SI1-8
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    2. Christoph Bohringer, Andreas Loschel and Thomas F. Rutherford, 2006. "Efficiency Gains from "What"-Flexibility in Climate Policy An Integrated CGE Assessment," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 405-424.
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    Cited by:

    1. Wu, Jie & Fan, Ying & Timilsina, Govinda & Xia, Yan, 2022. "Exploiting Complementarity of Carbon Pricing Instruments for Low-Carbon Development in the People’s Republic of China," ADBI Working Papers 1329, Asian Development Bank Institute.
    2. Håkon Sælen & Hege Westskog & Einar Strumse, 2012. "Values, attitudes, and pro-environmental behaviours – is there a link? Results from a Norwegian survey," Economics Bulletin, AccessEcon, vol. 32(1), pages 486-493.
    3. Jan Imhof, 2012. "Fuel Exemptions, Revenue Recycling, Equity and Efficiency: Evaluating Post-Kyoto Policies for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 148(II), pages 197-227, June.

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