Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

Using the CGE model with endogenous technology progress, this study investigates economic impacts and differences of subsidy and taxation for stimulating the supply of renewable energy. Both subsidy for R&D investment on developing renewable energy and taxation on conventional energy increase the supply of renewable energy with even different extension. However, the policy of subsidy induces the lower price level and the higher economic growth, while the taxation results in the higher price level and the lower economic growth. Therefore, subsidy could be preferable for developing renewable energy without economic depression. In order to maintain a sustainable economic development, however, it is critical issue to determine the optimal amount of subsidy because R&D investment can be crowding out the physical investment, in which induces an economic lose in the long run.