Want to replace fossil fuels, will carbon tax be sufficient Promotion of RE -> unpriced [[Externality|externality]] of CO2 emission - pricing externality 1. tax on emissions 2. tradable permit system lazard.com LCOE ### Technology Mandates - may not be efficient - applies uniform standards to different emitters ### Subsidies for RE Clean portfolio standard - minimum share of electricity from RE ### Feed-in tariffs 1. Fixed price - payment independent from market price 2. Premium - price on top of market price 3. Contract for Difference (CfD) - Guarantee a price throughout contract duration - if wholesale price exceeds strike price, generator must pay back #### FiT Payment calculation 1. Actual levelized cost of RE generation 2. Value of RE generation - society or utility 3. Fixed price - arbitrary 4. Auction/bidding - CfD ### Issues with Subsidies 1. Subsidy for green power $\neq$ taxation on borwn power - may lead to overconsumption 2. Benefit leakeage - subsidized green power being exported, benefits not seen domestically #### Energy Security Not just about self-sufficiency - Diversification In the US, renewables not about energy security, but environmental impact #### Learning by doing Network externality - larger network -> growth