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Competitive trilateral lobbying for and against subsidizing green energy

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Abstract

A small open economy operates a carbon emission trading scheme and subsidizes green energy. Taking cap-and-trade as given, we seek to explain the subsidy as the outcome of a trilateral tug of war between the ‘green’ energy industry, the ‘black’ energy industry and consumers. With parametric functions we fully solve the competitive economic equilibrium and the lobbying Nash equilibrium. We show how the resultant subsidy depends on the political influence of all three lobbying groups and we trace its determinants. Whether consumers have ‘green preferences’ turns out to be crucial for the results.

Suggested Citation

  • Rüdiger Pethig, 2011. "Competitive trilateral lobbying for and against subsidizing green energy," Volkswirtschaftliche Diskussionsbeiträge 150-11, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    • Handle: RePEc:sie:siegen:150-11
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    File URL: http://www.wiwi.uni-siegen.de/vwl/repec/sie/papers/150-11.pdf
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    More about this item

    Keywords

    green preferences; fossil fuel; green energy; green energy subsidy; cap-and-trade; overlapping regulation; competitive lobbying;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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