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Can Uncertainty Justify Overlapping Policy Instruments to Mitigate Emissions?

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  • Oskar Lecuyer
  • Philippe Quirion

Abstract

This article constitutes a new contribution to the analysis of overlapping instruments to cover the same emission sources. Using both an analytical and a numerical model, we find that when the risk that the CO2 price drops to zero and the political unavailability of a CO2 tax (at least in the European Union) are taken into account, it can be socially beneficial to implement an additional instrument encouraging the reduction of emissions, for instance a renewable energy subsidy. Our analysis has both a practical and a theoretical purpose. It aims at giving economic insight to policymakers in a context of increased uncertainty concerning the future stringency of the European Emission Trading Scheme. It also gives another rationale for the use of several instruments to cover the same emission sources, and shows the importance of accounting for corner solutions in the definition of the optimal policy mix

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File URL: http://cec-repec.site11.com/RePEc/cec/wpaper/13-01-Cahier-R-2013-01-Lecuyer-and-Quirion.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by Chaire Economie du Climat in its series Working Papers with number 1301.

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Length: 30 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:cec:wpaper:1301

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Web page: http://cec-repec.site11.com/
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Related research

Keywords: Uncertainty; Policy overlapping; Mitigation policy; Energy policy; EU-ETS; Renewable energy; Corner solutions; Nil CO2 price; European Union;

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References

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Citations

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Cited by:
  1. Frédéric Branger & Oskar Lecuyer & Philippe Quirion, 2013. "The European Union Emissions Trading System : should we throw the flagship out with the bathwater ?," CIRED Working Papers hal-00866408, HAL.
  2. Fagiani, Riccardo & Richstein, Jörn C. & Hakvoort, Rudi & De Vries, Laurens, 2014. "The dynamic impact of carbon reduction and renewable support policies on the electricity sector," Utilities Policy, Elsevier, Elsevier, vol. 28(C), pages 28-41.
  3. Adrien Vogt-Schilb & Stéphane Hallegatte, 2013. "Marginal Abatement Cost Curves and the Optimal Timing of Mitigation Measures," Working Papers, Fondazione Eni Enrico Mattei 2013.89, Fondazione Eni Enrico Mattei.
  4. repec:hal:wpaper:hal-00866408 is not listed on IDEAS
  5. repec:hal:wpaper:hal-00916328 is not listed on IDEAS
  6. repec:hal:ciredw:hal-00916328 is not listed on IDEAS
  7. Pegels, Anna & Lütkenhorst, Wilfried, 2014. "Is Germany’s Energy Transition a case of successful Green Industrial Policy? Contrasting wind and solar PV," MPRA Paper 57827, University Library of Munich, Germany.

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