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Journal of Environmental Accounting and Management 6(4) (2018) 325--333 | DOI:10.5890/JEAM.2018.12.005

Alessandro Sapio

Department of Business and Economics, Parthenope University of Naples, Naples, Italy

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Abstract

Through a theoretical model of subsidies for renewable energy (RE), the paper shows that regions characterised by high energy demand and low RE endowments contribute disproportionately to the green energy budget. Such a pattern is emphasised if subsidies are tied to wholesale electricity prices, because the merit order effect associated with renewables, by depressing the electricity price, justifies higher subsidies to RE generators. Due to a pecuniary externality, interconnection between regions allows the region with a lower income and richer RE production to partly shift the burden of RE support on the other region. These spatial patterns can be overturned if RE ownership is distributed across zones, and under some parameter sets in which market integration implies a heavier unit burden of RE support.

Acknowledgments

The author would like to thank 2 anonymous references, Antoine Mandel, and the audiences in Milan (1st symposium of the Italian Association of Energy Economists, December 2nd 2016) and Turin (seminar at the Department of Economics and Statistics, February 1st 2017) for their useful comments and suggestions. Financial support by Parthenope University of Naples, Bando di sostegno alla ricerca individuale per il triennio 2015-2017, annualita’ 2016, is gratefully acknowledged. Any remaining error is solely the author’s responsibility.

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