How Markets, Policies and Consumers Influence the Transition to Clean Energy

Abstract

Climate change poses fundamental threats to human populations and ecosystems. Transitioning to a cleaner and more sustainable energy system is central to combating climate change while ensuring universal energy access. However, the transition to clean energy is not free of obstacles. The major players in the energy system, including producers, regulators and consumers, have diverse objectives. My dissertation studies how these players shape the transition to a cleaner, more efficient energy system. The first chapter models the strategic interactions between the dirty producer and the clean producer in the transition to clean technology, showing that the incumbent dirty producer can use market power to deter the entry by the clean producer and suppress R&D investment in clean technology. The impacts of tax and subsidy on peak pollution stock, as well as social welfare, are also analyzed. In the second chapter, I develop a theoretical model of consumers’ responses to energy efficiency policies, and present empirical evidence that shows a negative direct rebound effect for Energy Star dishwashers and a potentially positive direct rebound effect for Energy Star air conditioners. Negative rebound effects can amplify energy savings, while positive rebound effects can offset energy savings from using more efficient technologies. The third chapter uses machine learning methods to study how the impacts of solar rebate programs vary with the presence of other solar policies and demographic characteristics in the U.S. The results show a positive average treatment effect of solar rebate programs with significant heterogeneity. Important factors explaining the heterogeneity include Renewable Energy Portfolio, residential electricity rate and year of installation. Relationships between treatment effect and important explanatory factors display significant non-linearity. These findings suggest that legislative goals are more likely to support rebate programs than other types of solar policies, and certain solar market characteristics are indicative of high program effects.