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Can uncertainty justify overlapping policy instruments to mitigate emissions?

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  • Lecuyer, Oskar
  • Quirion, Philippe

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 if there is a risk that the carbon price drops to zero and if the political unavailability of a CO2 tax (at least in the European Union) is 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.

Suggested Citation

  • Lecuyer, Oskar & Quirion, Philippe, 2013. "Can uncertainty justify overlapping policy instruments to mitigate emissions?," Ecological Economics, Elsevier, vol. 93(C), pages 177-191.
  • Handle: RePEc:eee:ecolec:v:93:y:2013:i:c:p:177-191
    DOI: 10.1016/j.ecolecon.2013.05.009
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    1. repec:eee:enepol:v:109:y:2017:i:c:p:685-693 is not listed on IDEAS
    2. Guo, Jian-Xin & Zhu, Lei & Fan, Ying, 2016. "Emission path planning based on dynamic abatement cost curve," European Journal of Operational Research, Elsevier, vol. 255(3), pages 996-1013.
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    4. Shahriar Shah Heydari & Niels Vestergaard, 2015. "Alternate solutions in mixing energy tax/subsidy and emission control policies," Working Papers 119/15, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    5. Marianne Fay & Stephane Hallegatte & Adrien Vogt-Schilb & Julie Rozenberg & Ulf Narloch & Tom Kerr, 2015. "Decarbonizing Development," World Bank Publications, The World Bank, number 21842, August.
    6. Federica Cucchiella & Idiano D’Adamo & Massimo Gastaldi, 2015. "Profitability Analysis for Biomethane: A Strategic Role in the Italian Transport Sector," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 440-449.
    7. repec:era:chaptr:2015-rpr-23-4 is not listed on IDEAS
    8. repec:hal:wpaper:hal-00916328 is not listed on IDEAS
    9. Koch, Nicolas & Fuss, Sabine & Grosjean, Godefroy & Edenhofer, Ottmar, 2014. "Causes of the EU ETS price drop: Recession, CDM, renewable policies or a bit of everything?—New evidence," Energy Policy, Elsevier, vol. 73(C), pages 676-685.
    10. Pegels, Anna & Lütkenhorst, Wilfried, 2014. "Is Germany׳s energy transition a case of successful green industrial policy? Contrasting wind and solar PV," Energy Policy, Elsevier, vol. 74(C), pages 522-534.
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    12. repec:eee:rensus:v:74:y:2017:i:c:p:824-834 is not listed on IDEAS
    13. 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.
    14. Frédéric Branger & Oskar Lecuyer & Philippe Quirion, 2013. "The European Union Emissions Trading System : should we throw the flagship out with the bathwater ?," Working Papers hal-00866408, HAL.
    15. 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, vol. 28(C), pages 28-41.
    16. Frédéric Branger & Oskar Lecuyer & Philippe Quirion, 2015. "The European Union Emissions Trading Scheme: should we throw the flagship out with the bathwater?," Post-Print hal-01137875, HAL.
    17. repec:gam:jeners:v:11:y:2018:i:3:p:559-:d:134815 is not listed on IDEAS
    18. repec:eee:enepol:v:111:y:2017:i:c:p:268-280 is not listed on IDEAS
    19. Mathy, Sandrine & Fink, Meike & Bibas, Ruben, 2015. "Rethinking the role of scenarios: Participatory scripting of low-carbon scenarios for France," Energy Policy, Elsevier, vol. 77(C), pages 176-190.
    20. Baran Doda & Simon Quemin, 2018. "Linking Permit Markets Multilaterally," Working Papers 1804, Chaire Economie du climat.
    21. repec:hal:ciredw:hal-00916328 is not listed on IDEAS
    22. Petr Cermak & Jarmila Zimmermannova & Jan Lavrincik & Miroslav Pokorny & Jiri Martinu, 2015. "The Broker Simulation Model in the Emission Allowances Trading Area," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 80-95.
    23. repec:eee:eneeco:v:63:y:2017:i:c:p:332-347 is not listed on IDEAS

    More about this item

    Keywords

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

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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