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The dynamic impact of carbon reduction and renewable support policies on the electricity sector

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  • Fagiani, Riccardo
  • Richstein, Jörn C.
  • Hakvoort, Rudi
  • De Vries, Laurens
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    Abstract

    Carbon reduction and renewable energy policies are implemented in Europe to improve the sustainability of the electricity sector while achieving security of supply. We investigate the interactions between these policies using a dynamic investment model. Our analysis indicates that both policies are necessary to achieve a sustainable power sector. However, renewable energy generation significantly affects carbon markets and could lead to very low prices. These would attract investments in carbon intensive technologies, locking the sector into future higher emissions. To contrast this effect, policy makers may introduce a floor price in the carbon market or adjust the emissions quota periodically.

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    Bibliographic Info

    Article provided by Elsevier in its journal Utilities Policy.

    Volume (Year): 28 (2014)
    Issue (Month): C ()
    Pages: 28-41

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    Handle: RePEc:eee:juipol:v:28:y:2014:i:c:p:28-41

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    Web page: http://www.elsevier.com/locate/inca/30478

    Related research

    Keywords: Electricity sector; EU ETS; Renewable energy policy; Dynamic policy interaction;

    References

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    10. Fagiani, Riccardo & Hakvoort, Rudi, 2014. "The role of regulatory uncertainty in certificate markets: A case study of the Swedish/Norwegian market," Energy Policy, Elsevier, vol. 65(C), pages 608-618.
    11. Fagiani, Riccardo & Barquín, Julián & Hakvoort, Rudi, 2013. "Risk-based assessment of the cost-efficiency and the effectivity of renewable energy support schemes: Certificate markets versus feed-in tariffs," Energy Policy, Elsevier, vol. 55(C), pages 648-661.
    12. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Wiley Blackwell, vol. 41(4), pages 477-91, October.
    13. Grubb, M. & Newbery, N., 2007. "Pricing Carbon For Electricity Generation: National And International Dimensions," Cambridge Working Papers in Economics 0751, Faculty of Economics, University of Cambridge.
    14. Jensen, Stine Grenaa & Skytte, Klaus, 2003. "Simultaneous attainment of energy goals by means of green certificates and emission permits," Energy Policy, Elsevier, vol. 31(1), pages 63-71, January.
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    16. De Jonghe, Cedric & Delarue, Erik & Belmans, Ronnie & D'haeseleer, William, 2009. "Interactions between measures for the support of electricity from renewable energy sources and CO2 mitigation," Energy Policy, Elsevier, vol. 37(11), pages 4743-4752, November.
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