Designing an EU energy and climate policy portfolio for 2030: Implications of overlapping regulation under different levels of electricity demand
Benjamin Lutz and
Energy Policy, 2014, vol. 75, issue C, 91-99
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.
Keywords: EU climate policy; Overlapping regulation; Power sector (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:75:y:2014:i:c:p:91-99
Access Statistics for this article
Energy Policy is currently edited by N. France
More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().