With respect to sustainable development, how to promote renewable energy is a major issue. Here, we introduce a hybrid subsidy mechanism that considers both input and output subsidies. Hybrid subsidies are analyzed with stochastic optimization approaches. An outstanding advantage of hybrid subsidies is the flexibility to adjust the intensity between the input and output subsidies. Our study shows that input-biased subsidies advance outputs and improve environmental efficiency (EE), while output-biased subsidies reduce risk and boost producer subsidy equivalents (PSEs). Therefore, the policy implication of this research is that different subsidy intensities should be employed according to preferences or social requirements.
Keywords: Environmental efficiency; Hybrid subsidy; Renewable energy.