RSS | Joseph Aldy 'Capital versus output subsidies: implications for alternative incentives for wind energy'

Joseph Aldy, Associate Professor of Public Policy at Mossavar-Rahmani Center for Business and Government, John F. Kennedy School of Government, Harvard, will be the speaker at this event. Joseph will be presenting his paper “Capital versus Output Subsidies: Implications for Alternative Incentives for Wind Energy”, co-authored with Todd D. Gerarden and Richard L. Sweeney. The abstract for the paper is below:

“We examine the choice between using capital and output subsidies to promote wind energy in the United States. In this sector, some subsidies support upfront investment while others reward output. We exploit a natural experiment in which wind farm developers were unexpectedly given the opportunity to choose between these two options in order to estimate the differential impact of these subsidies on project productivity. Using matching and fuzzy regression discontinuity designs, we find that wind farms choosing the capital subsidy produce 8 to 14 percent less electricity per unit of capacity than wind farms selecting the output subsidy and that this effect is driven by incentives generated by these subsidies rather than selection. We then use these estimates to evaluate the public economics of U.S. wind energy subsidies. Preliminary results suggest the Federal government paid 17 to 20 percent more per unit of output from wind farms receiving capital subsidies than they would have paid under the existing output subsidy.”