An Economic Analysis of Policies for Reducing Global-Warming-Gas Emission in Japan

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This research evaluates the government policies in supporting the diffusion of Solar Photovoltaic (PV) systems in the residential sector of Japan. We estimate a structural demand and supply model of PV systems using market-level data and simulate diffusion paths of PV systems if the past government subsidy program had not been offered. The simulation result reveals that the subsidy shifted the demand function ofPV, and increased the amount of PV installed considerably. We also assess the new feed-in-tariff program by simulating several scenarios on electricity pricing and presupposed future production costs of PV. The result indicates that the feed-in-tariff is likely to contribute to expand PV systems. However, it costs too much and we found that, in terms of social welfare, it is difficult to justify the feed-in-tariff unless we estimate the monetary value of CO2 maximally.