The no cost emission saving policy

Jan Christian Schinke

No 2958, EcoMod2011 from EcoMod

Abstract: The EU is enthusiastically proposing climate saving policies that place Europe as the innovator in reducing emissions and increasing the share of renewable energy sources (RES). However, the application of suitable instruments appears to create problems with differences between the approaches that seek to achieve the objectives. The European Union Emissions Trading Scheme (EU-ETS) and national support regimes such as renewable energy feed-in tariffs (REFIT) in particular are often not well integrated. Whilst the first aim is to price carbon emissions, the second is to increase the market share of green energy, however coordination of the two is lacking. This paper analyses literature addressing the two instruments of EU-ETS and REFITs and shows how when jointly applied they can interact with one another. If interaction is possible, what potential to reduce emissions at a faster rate without increasing costs is created? The legal options in addition to economic efficiencies enable a new policy that can faster reach the ambitious climate saving goals of the EU. Market based trading emissions trading scheme and non-market based support regimes for renewable energy sources are linked to each other. What are the economical benefits?The effects of both instruments jointly implemented could have an enhancing effect if contemporaneous renewable energy sources (RES) support regimes would be accepted not as a cost intensive instrument, but as one that optimise inter-system conditions. The targeted support of selected technologies at selected places or regions would lead to cost-optimising use of spending, higher outputs and lower costs per unit. The quantification of the potential remains open at this point and requires deeper research. What can be mentioned is the missing pragmatism to calculate the full effects through RES capacities. The separation of conventional and RES source grid loads would be the first step for the future accreditation of unrealised intra-system emission reductions. It is an unpopular result for EU-ETS participants, especially from the energy sector, as they would lose their economic advantage, while the community and the environment would profit highly from additional carbon savings at zero costs. Ecologically, it would enable an enormous step forward in European climate saving policies.

Keywords: EU / Germany; Energy and environmental policy; Public finance and tax issues (search for similar items in EconPapers)
Date: 2011-07-06
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Persistent link: https://EconPapers.repec.org/RePEc:ekd:002625:2958

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