On the welfare effects of subsidy game for renewable energy investment: Toward a dynamic equilibrium model

This paper focuses on the welfare effects of subsidy game for renewable energy investment between two neighboring regions. By employing a dynamic control model, the stationary equilibrium is solved under various scenarios. The major findings indicate that, the optimal subsidy strategies for both regions depend on a series of factors, including social capital, emission intensity of traditional energy and production efficiency of renewable energy and so on. Meanwhile, neither competitive strategy nor cooperative strategy is necessarily better than the other in the bidding game. Furthermore, the effects of Pigouvian tax on subsidy intensity are negative, while the changes of the equilibrium investment of renewable energy are uncertain.