Costs and trade-offs associated with renewable energy policies for Small Island Developing States: Case study for Jamaica

Abstract

Due to their unique economic and geographic features, Small Island Developing States may find that energy policy recommendations in the existing literature (i) have only limited applicability to their specific context or (ii) are primarily descriptive. Furthermore, inconsistencies in energy policy targets in Small Island Developing States call into question the analytical basis for these targets. To fill these gaps, this paper uses an empirical, dynamic optimization model to assess the costs and trade-offs associated with a menu of renewable energy policies while accounting for the economic and geographic idiosyncrasies of small island states. Using the island of Jamaica as a demonstration, four policies are examined. Findings indicate that a carbon tax results in the lowest additional cost to society if the government's primary objective is reducing carbon emissions. If, however, the government's priority is energy independence, then a renewable portfolio standard is more effective.