Time-Limited Subsidies: Optimal Taxation with Implications for Renewable Energy Subsidies

Pigouvian subsidies are efficient, but output subsidies with uncertain or limited durations are not Pigouvian. This paper shows that optimal “time-limited” policies must also subsidize investment to correct externalities generated after the output subsidy ends.

Authors

Publication Details

Journal
Federal Reserve Bank of Dallas, Working Papers
Published
2025-08-01
DOI
https://doi.org/10.24149/wp2530
Citations
2
Primary Topic
Energy, Environment, and Transportation Policies
Type
article
Field-Weighted Citation Impact
0.73
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article

Time-Limited Subsidies: Optimal Taxation with Implications for Renewable Energy Subsidies

Michael Ricks, Owen Kay
2 citations
Federal Reserve Bank of Dallas, Working Papers
Energy, Environment, and Transportation Policies
0.73
article

Time-Limited Subsidies: Optimal Taxation with Implications for Renewable Energy Subsidies

Michael Ricks, Owen Kay
article en
2 citations

Abstract

Pigouvian subsidies are efficient, but output subsidies with uncertain or limited durations are not Pigouvian. This paper shows that optimal “time-limited” policies must also subsidize investment to correct externalities generated after the output subsidy ends.

Federal Reserve Bank of Dallas, Working PapersVol. 2025(2530)
Affordable and clean energy
Openalex Percentile: Top 29%
Energy, Environment, and Transportation Policies
0.73
DOISourceOpenAlex
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Time-Limited Subsidies: Optimal Taxation with Implications for Renewable Energy Subsidies — Michael Ricks, Owen Kay · Federal Reserve Bank of Dallas, Working Papers (2025) | TGRS Research Map | TGRS