CCED 工作论文系列 No.20120609
CCED Working Paper Series
Climate Change Impacts of Renewable
Energy Policies: the Roles of Capacity
Constraints and Market Power
Min Wang Jinhua Zhaoy
Peking University Michigan State University
A recent literature of "Green Paradox" shows that green policy intended to alleviate the problem of climate change may turn to speed it up (Sinn, 2008). The goal of this paper is to examine the climate change impacts of renewable energy policies by focusing on capacity constraints of renewable energies and market power in the sector of fossil fuels, both of which turn out to play important roles in determining policy impacts on the time pro…le of fossil fuel supply as well as the time pattern of greenhouse gas (GHG) emissions. By recognizing the capacity constraints, in this paper, we distinguish renewable energies between capacity constrained renewable energies and abundant renewable energies, and study their price policies and quantity policies in competitive market and non-competitive market. We show that the "Green Paradox" can be con…rmed in the benchmark case, i.e. government support for abundant renewable energies in competitive market, but after considering the two factors mentioned,it may not exist: the capacity constraints of renewable energies help delay the fossil fuel supply to the distant future; the existence of market power in the sector fossil fuels reverses the fossil fuel owners’response to renewable energy policies by reducing the fossil fuel extraction in the near future.