DEFINITION of 'Feed-In Tariff'

An economic policy created to promote active investment in and production of renewable energy sources. Feed-in tariffs typically make use of long-term agreements and pricing tied to costs of production for renewable energy producers. By offering long-term contracts and guaranteed pricing, producers are sheltered from some of the inherent risks in renewable energy production, thus allowing for more diversity in energy technologies.

BREAKING DOWN 'Feed-In Tariff'

The first feed-in tariff was implemented by the Carter administration in the United States in the late 1970s. The National Energy Act as it was known was meant to promote energy conservation along with the development of new renewable sources of energy, such as solar and wind power. Since this time, feed-in tariffs have been widely used throughout the world, most notable in Germany, Spain and other parts of Europe.

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