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Climate policy, interconnection and carbon leakage: The effect of unilateral UK policy on electricity and GHG emissions in Ireland

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  • John Curtis, Valeria Di Cosmo, and Paul Deane

Abstract

This paper examines the effect of the UK's unilateral policy to implement a carbon price floor in Great Britain for fossil-fuel based electricity generation on the adjoining electricity market in Ireland. We find that, subject to efficient use of interconnectors between the two markets and constant imports from France and the Netherlands, a carbon price floor will lead to carbon leakage, with associated emissions in the Republic of Ireland increasing by 8% and electricity prices increasing by 2.4%. However, across the combined Irish and British electricity markets total emissions decline: high carbon prices drive decarbonisation in electricity generation. The UK's now implemented policy, which is a mechanism to directly manage carbon prices, substantially differs with the yet to be agreed EU policy response to postpone auctions of Emissions Trading Scheme allowances with the intention of indirectly increasing the price of carbon. The analysis suggests that the EU proposal will have only negligible additional effect on emissions from the combined Irish and UK electricity sectors.

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  • John Curtis, Valeria Di Cosmo, and Paul Deane, 2014. "Climate policy, interconnection and carbon leakage: The effect of unilateral UK policy on electricity and GHG emissions in Ireland," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
  • Handle: RePEc:aen:eeepjl:eeep3_2_09curtis
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    Cited by:

    1. Walsh, D.M. & O'Sullivan, K. & Lee, W.T. & Devine, M.T., 2014. "When to invest in carbon capture and storage technology: A mathematical model," Energy Economics, Elsevier, vol. 42(C), pages 219-225.
    2. Lynch, Muireann A, 2017. "Re-evaluating Irish energy policy in light of brexit," Research Notes RN20170201, Economic and Social Research Institute (ESRI).
    3. repec:esr:forcas:qec20172 is not listed on IDEAS
    4. Clancy, J.M. & Gaffney, F. & Deane, J.P. & Curtis, J. & Ó Gallachóir, B.P., 2015. "Fossil fuel and CO2 emissions savings on a high renewable electricity system – A single year case study for Ireland," Energy Policy, Elsevier, vol. 83(C), pages 151-164.
    5. Curtis, John & Devitt, Niamh & di Cosmo, Valeria & Farrell, Niall & FitzGerald, John & Hyland, Marie & Lynch, Muireann & Lyons, Sean & McCoy, Daire & Malaguzzi Valeri, Laura & Walsh, Darragh, 2014. "Irish Energy Policy: An Analysis of Current Issues," Research Series, Economic and Social Research Institute (ESRI), number rs37 edited by FitzGerald, John & Malaguzzi Valeri, Laura.
    6. Barrett, Alan & Bergin, Adele & FitzGerald, John & Lambert, Derek & McCoy, Daire & Morgenroth,Edgar & Siedschlag, Iulia & Studnicka, Zuzanna, 2015. "Scoping the Possible Economic Implications of Brexit on Ireland," Research Series, Economic and Social Research Institute (ESRI), number RS48.

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    JEL classification:

    • F0 - International Economics - - General

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