Do Renewable Energy Policies Reduce Carbon Emissions? On Caps and Intra-Jurisdictional Leakage

Grischa Perino and Johannes Jarke

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: Climate policies overlapping a cap-and-trade scheme are generally considered not to change domestic emissions. In a two-sector general equilibrium model where only one sector is covered by a cap, we find that such policies do have a net impact on carbon emissions through inter-sectoral leakage. Promotion of renewable energy reduces emissions if tax-funded, but can increase emissions if funded by a levy on electricity. Replacing fossil fuels by electricity in uncapped sectors (e.g. power-to-heat or electric cars) and increases in the efficiency of electricity use reduce domestic emissions. Moreover, the commonly used measure to assess renewable energy policies is biased.

JEL-codes: H23 Q48 Q58 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:113007

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