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Coordination of carbon reduction and renewable energy support policies

Author

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  • PEDRO LINARES
  • FRANCISCO JAVIER SANTOS
  • MARIANO VENTOSA

Abstract

The European Union is currently pursuing ambitious objectives regarding carbon emissions reductions and renewable energy deployment (renewable energy support, RES), as part of a comprehensive energy policy effort. However, significant interactions may arise between the policy instruments used (Emissions Trading Scheme and RES-specific measures), such as double-counting incentives or geographical overlapping. This article examines these interactions using analytical and simulation research and offers some policy recommendations. The major conclusions are that both instruments are required in order to meet the objectives, and that their use in combination may be advantageous regarding consumer costs. However, they must be carefully coordinated, since part of the carbon allowance price may be incorporated into the RES certificate price. This will produce a reduction in the strength of the emissions reduction signal, and also a different distribution of the cost of the policies. In addition, each policy needs to focus at the geographical level appropriate for its objectives (carbon and security of supply policies at the regional level, and RES-induced local development at the national level).

Suggested Citation

  • Pedro Linares & Francisco Javier Santos & Mariano Ventosa, 2008. "Coordination of carbon reduction and renewable energy support policies," Climate Policy, Taylor & Francis Journals, vol. 8(4), pages 377-394, July.
  • Handle: RePEc:taf:tcpoxx:v:8:y:2008:i:4:p:377-394
    DOI: 10.3763/cpol.2007.0361
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    File URL: http://hdl.handle.net/10.3763/cpol.2007.0361
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    References listed on IDEAS

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    1. Fischer, Carolyn, 2006. "How Can Renewable Portfolio Standards Lower Electricity Prices?," Discussion Papers dp-06-20, Resources For the Future.
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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. repec:gam:jeners:v:10:y:2017:i:8:p:1166-:d:107424 is not listed on IDEAS
    3. Delarue, Erik & Van den Bergh, Kenneth, 2016. "Carbon mitigation in the electric power sector under cap-and-trade and renewables policies," Energy Policy, Elsevier, vol. 92(C), pages 34-44.
    4. Gelabert, Liliana & Labandeira, Xavier & Linares, Pedro, 2011. "An ex-post analysis of the effect of renewables and cogeneration on Spanish electricity prices," Energy Economics, Elsevier, vol. 33(S1), pages 59-65.
    5. Sébastien Phan & Fabien Roques, 2015. "Is the depressive effect of renewables on power prices contagious? A cross border econometric analysis," Cambridge Working Papers in Economics 1527, Faculty of Economics, University of Cambridge.
    6. Würzburg, Klaas & Labandeira, Xavier & Linares, Pedro, 2013. "Renewable generation and electricity prices: Taking stock and new evidence for Germany and Austria," Energy Economics, Elsevier, vol. 40(S1), pages 159-171.
    7. Wang, Qian & Hubacek, Klaus & Feng, Kuishuang & Wei, Yi-Ming & Liang, Qiao-Mei, 2016. "Distributional effects of carbon taxation," Applied Energy, Elsevier, vol. 184(C), pages 1123-1131.
    8. 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.

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