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Comparing Volume and Blend Renewable Energy Mandates under a Carbon Budget

Author

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  • Jean-Pierre Amigues
  • Ujjayant Chakravorty
  • Gilles Lafforgue
  • Michel Moreaux

Abstract

In order to encourage substitution of fossil fuels by cleaner renewables, regulatory agencies generally chose between two types of energy standards. They can either mandate a minimum volume of renewable energy, or they can specify a minimum share of renewables in the energy-mix as in Europe. This paper uses a simple model to compare the dynamic effects of these two policies under a given carbon budget constraint. Assuming the same budget to be exhausted at the same time, we show that a volume mandate leads to a lower energy price, induces a greater subsidy on clean energy and a smaller fossil fuel tax than the blend mandate. The volume mandate also leads to larger cumulative renewable energy use over the time horizon. We illustrate the model with plausible parameter values and show that the two energy mandates lead to significant differences in the price of carbon.

Suggested Citation

  • Jean-Pierre Amigues & Ujjayant Chakravorty & Gilles Lafforgue & Michel Moreaux, 2022. "Comparing Volume and Blend Renewable Energy Mandates under a Carbon Budget," Annals of Economics and Statistics, GENES, issue 147, pages 51-78.
    • Handle: RePEc:adr:anecst:y:2022:i:147:p:51-78
    DOI: https://doi.org/10.2307/48684786
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    Cited by:

    1. Aude Pommeret & Francesco Ricci & Katheline Schubert, 2022. "Confronting the Carbon Pricing Gap: Second Best Climate Policy," Post-Print hal-03726396, HAL.

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    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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