CO2 emissions market and renewable energy, are they linked? The case of the EU ETS

Jordi Perdiguero and Alex Sanz

Energy Economics, 2025, vol. 148, issue C

Abstract: Climate change is one of the main challenges facing humanity. Economic activity is generating temperature increases that can have serious economic and social effects. Various international agreements try to reduce emissions levels. The countries of the European Union adopted the emissions market system to try to modify the energy structure of their economies and thus reduce their emissions levels. This paper analyzes how the European Union Emissions Trading System (EU ETS) has been able to favour the introduction of renewable energies over fossil energies. Applying the Callaway-Sant'Anna difference-in-difference methodology, we observe how the introduction of this system within the European Union has had a positive and significant impact on the use of renewable energies. The EU ETS market has increased the use of renewables (up to 21 %) and decreased the use of fossil fuels (up to 18.4 %). This result shows that EU ETS is not only effective in reducing emissions but also in increasing the use of renewable energy. This positive effect is especially significant in the last phase when the price of emissions increases significantly. Continuing to promote this program in the future would help to increase the penetration of renewable energy in European economies.

Keywords: Renewable energies; Transfer system; Pollution; European Union (search for similar items in EconPapers)
JEL-codes: Q21 Q28 Q52 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:148:y:2025:i:c:s014098832500475x

DOI: 10.1016/j.eneco.2025.108648

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