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Interaction of Carbon Reduction and Green Energy Promotion in a Small Fossil-Fuel Importing Economy

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  • Rüdiger Pethig
  • Christian Wittlich

Abstract

We study the incidence of carbon-reduction and green-energy promotion policies in an open fossil-fuel importing general equilibrium economy. The focus is on mixed price-based or quantity-based policies. Instruments directed toward promoting green energy are shown to reduce also carbon emissions and vice versa. Their direct effects are stronger than their side effects, the more so, the greater is the elasticity of substitution in consumption between en-ergy and the consumption good. We calculate the effects of variations in individual policy parameters, especially on energy prices and welfare costs, and determine the impact of exoge-nous fossil-fuel price shocks on the economy.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2009/wp-cesifo-2009-08/cesifo1_wp2749.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2749.

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Date of creation: 2009
Date of revision:
Handle: RePEc:ces:ceswps:_2749

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Keywords: carbon reduction; green energy promotion; policy mix; interaction of policies;

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References

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  1. Steven Sorrell, 2003. "Carbon Trading in the Policy Mix," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 420-437.
  2. Klaus Skytte, 2006. "Interplay between Environmental Regulation and Power Markets," EUI-RSCAS Working Papers 4, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  3. Fischer, Carolyn, 2006. "How Can Renewable Portfolio Standards Lower Electricity Prices?," Discussion Papers dp-06-20, Resources For the Future.
  4. Rathmann, M., 2007. "Do support systems for RES-E reduce EU-ETS-driven electricity prices?," Energy Policy, Elsevier, vol. 35(1), pages 342-349, January.
  5. Fischer, Carolyn & Newell, Richard, 2004. "Environmental and Technology Policies for Climate Mitigation," Discussion Papers dp-04-05, Resources For the Future.
  6. Torstein Bye & Annegrete Bruvoll, 2008. "Multiple instruments to change energy behaviour: The emperor’s new clothes?," Discussion Papers 549, Research Department of Statistics Norway.
  7. 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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Citations

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Cited by:
  1. Lehmann, Paul & Gawel, Erik, 2013. "Why should support schemes for renewable electricity complement the EU emissions trading scheme?," Energy Policy, Elsevier, vol. 52(C), pages 597-607.
  2. Chen, Yu-Fu & Funke, Michael, 2009. "Booms, Recessions and Financial Turmoil: A Fresh Look at Investment Decisions under Cyclical Uncertainty," SIRE Discussion Papers 2009-31, Scottish Institute for Research in Economics (SIRE).
  3. Gawel, Erik & Strunz, Sebastian & Lehmann, Paul, 2012. "The German Energiewende under attack: Is there an irrational Sonderweg?," UFZ Discussion Papers 15/2012, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
  4. Fischer, Carolyn & Preonas, Louis, 2010. "Combining Policies for Renewable Energy: Is the Whole Less than the Sum of Its Parts?," Discussion Papers dp-10-19, Resources For the Future.
  5. Christoph Heinzel & Thomas Winkler, 2011. "Economic functioning and politically pragmatic justification of tradable green certificates in Poland," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(2), pages 157-175, June.
  6. Thomas Eichner & Rüdiger Pethig, 2009. "Efficient management of insecure fossil fuel imports through taxing (!) domestic green energy?," Volkswirtschaftliche Diskussionsbeiträge 138-09, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
  7. Fischer, Carolyn & Newell, Richard G. & Preonas, Louis, 2013. "Environmental and Technology Policy Options in the Electricity Sector: Interactions and Outcomes," Discussion Papers dp-13-20, Resources For the Future.
  8. Carolyn Fischer & Richard G. Newell & Louis Preonas, 2014. "Environmental and Technology Policy Options in the Electricity Sector: Interactions and Outcomes," CESifo Working Paper Series 4757, CESifo Group Munich.

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