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Adjusting the CO2 cap to subsidised RES generation: Can CO2 prices be decoupled from renewable policy?

Author

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  • Richstein, Jörn C.
  • Chappin, Émile J.L.
  • de Vries, Laurens J.

Abstract

The low prices in the European Emission Trading System (EU ETS) have triggered discussions of various possible reforms. One option is to decouple the CO2 prices from renewable energy policy by adjusting the emission cap to renewable energy investment overshoots. We introduce two ways of reducing the CO2 cap in response to overshoots of renewable policy investment over previously announced targets. We investigate these options with the agent-based model EMLab-generation. We find that both policy implementations are successful in restoring prices. They also ensure that making public investments that exceed policy targets contribute to carbon emission reduction, and that renewable policy does not benefit the most emission-intensive power plants. However, neither policy is suitable for achieving specifc levels of prices or price volatility.

Suggested Citation

  • Richstein, Jörn C. & Chappin, Émile J.L. & de Vries, Laurens J., 2015. "Adjusting the CO2 cap to subsidised RES generation: Can CO2 prices be decoupled from renewable policy?," Applied Energy, Elsevier, vol. 156(C), pages 693-702.
  • Handle: RePEc:eee:appene:v:156:y:2015:i:c:p:693-702
    DOI: 10.1016/j.apenergy.2015.07.024
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    References listed on IDEAS

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    4. Rahman, Md. Mizanur & Paatero, Jukka V. & Lahdelma, Risto & A. Wahid, Mazlan, 2016. "Multicriteria-based decision aiding technique for assessing energy policy elements-demonstration to a case in Bangladesh," Applied Energy, Elsevier, vol. 164(C), pages 237-244.
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    10. Bhagwat, Pradyumna C. & Richstein, Jörn C. & Chappin, Emile J.L. & de Vries, Laurens J., 2016. "The effectiveness of a strategic reserve in the presence of a high portfolio share of renewable energy sources," Utilities Policy, Elsevier, vol. 39(C), pages 13-28.
    11. Salehizadeh, Mohammad Reza & Soltaniyan, Salman, 2016. "Application of fuzzy Q-learning for electricity market modeling by considering renewable power penetration," Renewable and Sustainable Energy Reviews, Elsevier, vol. 56(C), pages 1172-1181.
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