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Title

Designing an EU energy and climate policy portfolio for 2030: Implications of overlapping regulation under different levels of electricity demand

Publication Year

2014

Author(s)
  • Flues, Florens
  • Loeschel, Andreas
  • Lutz, Benjamin Johannes
  • Schenker, Oliver
Source
ENERGY POLICY Volume: 75 Pages: 91-99 Published: 2014
ISSN
0301-4215 eISSN: 1873-6777
Abstract

The European Union's current climate and energy policy has to operate under an ex ante unforeseen economic crisis. As a consequence prices for carbon emission allowances in the EU Emissions Trading System collapsed. However, this price collapse may be amplified by the interaction of a carbon emission cap with supplementary policy targets such as minimum shares for renewables in the power sector. The static interaction between climate and renewable policies has been discussed extensively. This paper extends this debate by analysing the efficiency and effectiveness of a policy portfolio containing a cap and trade scheme and a target for a minimum renewable share in different states of aggregate electricity demand. Making use of a simple partial equilibrium model of the power sector we identify an asymmetric interaction of emissions trading and renewable quotas with respect to different states of aggregate electricity demand. The results imply that unintended consequences of the policy interaction may be particularly severe and costly when aggregate electricity demand is low and that carbon prices are more sensitive to changes in economic activity if they are applied in combination with renewable energy targets. Our analysis of the policy interaction focuses on the EU, yet the conclusions may also be of relevance for fast growing emerging economies like China. (C) 2014 Elsevier Ltd. All rights reserved.

Author Keyword(s)
  • EU climate policy
  • Overlapping regulation
  • Power sector
KeyWord(s) Plus
  • DIRECTED TECHNICAL CHANGE
  • EMISSIONS
  • MARKETS
ESI Discipline(s)
  • Engineering
  • Environment/Ecology
  • Geosciences
  • Social Sciences
Web of Science Category(ies)
  • Energy & Fuels
  • Environmental Sciences
  • Environmental Studies
Adress(es)

[Flues, Florens] OECD, F-75775 Paris 16, France; [Loeschel, Andreas; Lutz, Benjamin Johannes; Schenker, Oliver] Ctr European Econ Res ZEW, D-68161 Mannheim, Germany; [Loeschel, Andreas] Heidelberg Univ, D-69115 Heidelberg, Germany

Reprint Adress

Schenker, O (reprint author), Ctr European Econ Res ZEW, L7,1, D-68161 Mannheim, Germany.

Country(ies)
  • France
  • Germany
CNRS - Adress(es)

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Accession Number
WOS:000347604500012
uid:/GRCBZN24
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