Carbon Pricing and Power Sector Decarbonisation: Evidence from the UK

Marion Leroutier

PSE Working Papers from HAL

Abstract: Decreasing greenhouse gas emissions from electricity generation is crucial to tackle climate change. Yet, empirically little is known on the effectiveness of economic instruments in the power sector. This paper examines the impact of the UK Carbon Price Support (CPS), a carbon tax implemented in the UK power sector in 2013. Compared to a synthetic control unit built from other European countries, emissions from the UK power sector declined by 26 percent on an average year between 2013 and 2017. Bounds on the effects of potential UK confounding policies and several placebo tests suggest that the carbon tax caused at least 80% of this decrease. Three mechanisms are highlighted: a decrease in emissions at the intensive margin; the closure of some high-emission plants at the extensive margin; and a higher probability of closure than in the synthetic UK for plants at risk of closure due to European air quality regulations. This paper shows that a carbon tax on electricity generation can lead to successful decarbonisation.

Keywords: Synthetic control method carbon tax; Synthetic control method; Carbon tax; Electricity generation (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-ene, nep-env, nep-eur, nep-reg and nep-res
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03265636v1
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Carbon pricing and power sector decarbonization: Evidence from the UK (2022)
Working Paper: Carbon Pricing and Power Sector Decarbonisation: Evidence from the UK (2021)
Working Paper: Carbon Pricing and Power Sector Decarbonisation: Evidence from the UK (2019)
Working Paper: Carbon Pricing and Power Sector Decarbonisation: Evidence from the UK (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:psewpa:halshs-03265636

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