Over the last 10 years, the solar photovoltaic (PV) market has experienced tremendous growth due in part to government incentive programs. However the effect and welfare analysis of these policy instruments remain ambiguous. In the first chapter of my dissertation, we estimate a dynamic model of households investment decisions on rooftop PV systems to understand the impact of these programs on residential solar installations and evaluate the outcome of alternative incentive policies. The model separately evaluates the effect of system prices, up-front subsidies, tax credits and production revenues using a 5-year data set collected by the California Solar Initiative program, which subsidized solar installations in California. The results indicate that capacity-based subsidies are equally effective as production-based subsidies, but that the latter are more efficient. With a $100 social cost of carbon, the total subsidies in California would be welfare neutral. If California were only as sunny as Frankfurt, Germany, this value has to be $200 to be welfare neutral. We find that without subsidies, 85% of the existing installations would not have occurred. The second chapter of my dissertation is on the political economics of corruption. This is a relevant question in the Environmental Economics due to the human factors involved in government regulations. We investigate the effects of unhindered corruption in the entry-certifying process of an industry on market structure and social welfare. To gain entry, a firm must pay a bribe-maximizing official an exogenous percentage of anticipated profit, in addition to the usual set up cost. This would lead to a monopoly, but only in markets without pre-existing firms. A benevolent social planner may use bribery to the benefit of society by either manipulating the number of pre-existing firms in the market, or by setting up independent (corrupt) licensing authorities. A socially optimal number of firms in the market may be reached by choosing the right number of pre-existing firms or by having exactly two licensing authorities. These mechanisms may be seen as restoring second-best efficiency in settings characterized by two major sources of distortion: Imperfect competition and corruption.