Reducing Rents from Energy Technology Adoption Programs by Exploiting Observable Information

R.F.T. Aalbers, H.R.J. Vollebergh, H.L.F. de Groot

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Abstract

In this paper, we study how regulators may improve upon the efficiency of their energy technology adoption programs by exploiting readily observable information to limit rent extraction by firms. Using panel data on 862 investment decisions in the Netherlands, we find that rent extraction is closely linked not only to technology characteristics, but also to the firm's capital budgetting technique. In particular, we find that firms are more likely to extract rent when either the technology's pay-back period or its required investment is lower, but less likely if they do not use a formal capital budgeting technique. Standard firm characteristics, such as size and sector, correlate with firms' use of capital budgeting techniques, thereby partly resolving the regulator's asymmetric information problem.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Volume2011-109
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper
Volume2011-109

Keywords

  • rent extraction
  • tagging
  • tax expenditure programs
  • technology adoption subsidies
  • investment decisions
  • bivariate probit model

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    Aalbers, R. F. T., Vollebergh, H. R. J., & de Groot, H. L. F. (2011). Reducing Rents from Energy Technology Adoption Programs by Exploiting Observable Information. (CentER Discussion Paper; Vol. 2011-109). Economics.