Optimal policies to promote the adoption of renewable energy technologies in Australia and China

Emission from fossil fuel consumption has degraded local environment and contributed to the global warming problem. Renewable energy such as wind and solar is clean and can be used sustainably as substitutes for fossile fuels in Australia and China. Adoption of these renewable energy technologies by private sector, however, may require subsidies from the government, at least in the initial years when technology costs are high. We will examine the optimal allocation of limited government funding for subsidies towards solar and wind energy technologies, taking into account the diminishing marginal returns to renewable energy capital. We use Australia and China as two case studies to illustrate the application of our framework.