This paper studies the impacts of renewable energy support policies on energy prices, fossil
fuel supply and thus carbon emissions from fossil fuels. Such supports are climate friendly if
the renewables are already competitive against fossil fuels. But if the renewables are not yet
competitive, the climate change impacts are often ambiguous and are sensitive to capacity
constraints of renewables production and to the fossil fuel market structure. If the renewables

We analyzed whether a competitive market can behave non-competitively when it is temporarily outside of its long-run equilibrium trajectory.