How damaging are environmental policy targets in terms of welfare?

•Regulator’s subsidy support makes the renewable energy Firm invest earlier and more, which helps to fulfil the policy target imposed by the Policy Maker.•The optimal subsidy maximizes the expected total surplus/welfare corresponding to the policy target.•Extending the policy deadline can decrease the optimal subsidy and increase welfare.•Increasing the target size will induce a larger subsidy only if the size is reachable and cannot increase welfare.