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Study Notes

Which economic policies can encourage investment in green energy?

AS, A-Level, IB
AQA, Edexcel, OCR, IB, Eduqas

Last updated 1 Feb 2023

This study note considers some of the economic policies that might be effective in increasing investment in and use of green energy sources.

There are several economic policies that can encourage investment in green energy:

  1. Renewable Energy Targets: Governments can set renewable energy targets and provide incentives for companies that meet these targets, such as tax credits or subsidies.
  2. Feed-in Tariffs: Governments can implement feed-in tariffs that guarantee a fixed price for the energy generated by renewable sources, which provides a stable return on investment for renewable energy companies.
  3. Carbon Pricing: Governments can implement a carbon tax or a cap-and-trade system that puts a price on carbon emissions, making fossil fuels more expensive and making renewable energy more competitive.
  4. Investment in Research and Development: Governments can invest in research and development of new technologies that make green energy more efficient and cost-effective.
  5. Energy Efficiency Standards: Governments can set energy efficiency standards for buildings and appliances, which can drive demand for energy-efficient products and encourage investment in green energy.
  6. Access to Finance: Governments can provide financing and loan guarantees to help green energy companies access capital and scale up their operations.

These policies can provide a supportive environment for green energy investment and drive growth in the industry, helping to reduce dependence on fossil fuels and mitigate the effects of climate change.

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