Author
Listed:
- Javier Gonzalez-Ruiz
- Carlos Rodriguez-Pardo
- Alice Di Bella
- Paolo Mastropietro
- Jose Pablo Chavez-Avila
- Massimo Tavoni
Abstract
European countries are debating policies to mitigate the increased energy costs caused by renewed geopolitical tensions, while pursuing decarbonization and electrification. A notable example is Italy's 2026 Decreto Bollette package, which proposes to remove the carbon price equivalent from the bids of certain gas-driven power plants to wholesale electricity markets, among other provisions. We use this as a case study to assess the long-term implications of suppressing the carbon price signal in the electricity market for investment, emissions, and consumer costs. We employ a stylized Italian power system using MARLEY, a multi-agent reinforcement learning framework focused on long-term electricity market assessments. In this framework, we test this policy across configurations with varying levels of support for green investment, resource adequacy, and flexibility. Results show that partial suppression of the carbon price signal yields short-term cost reductions but only a minor long-term effect on total system costs, as the deferred emissions are ultimately repaid by consumers. CO$_2$ emissions rise across most configurations since suppressing the price signal erodes incentives for renewable and storage investment. Only the most ambitious configurations for supporting green investment avoid this outcome, but they do so by marginalizing the wholesale price signal itself, thereby requiring a commitment to a hybrid market paradigm that is in contradiction with the rationale of the proposed price intervention.
Suggested Citation
Javier Gonzalez-Ruiz & Carlos Rodriguez-Pardo & Alice Di Bella & Paolo Mastropietro & Jose Pablo Chavez-Avila & Massimo Tavoni, 2026.
"EU-ETS under attack? The impact of carbon price suppression on the decarbonization of the power sector,"
Papers
2608.12363, arXiv.org.
Handle:
RePEc:arx:papers:2608.12363
Download full text from publisher
Corrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2608.12363. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
We have no bibliographic references for this item. You can help adding them by using this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: https://arxiv.org/ .
Please note that corrections may take a couple of weeks to filter through
the various RePEc services.