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Interaction of Carbon Reduction and Green Energy Promotion in a Small Fossil-Fuel Importing Economy

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  • Rüdiger Pethig
  • Christian Wittlich

Abstract

We study the incidence of carbon-reduction and green-energy promotion policies in an open fossil-fuel importing general equilibrium economy. The focus is on mixed price-based or quantity-based policies. Instruments directed toward promoting green energy are shown to reduce also carbon emissions and vice versa. Their direct effects are stronger than their side effects, the more so, the greater is the elasticity of substitution in consumption between en-ergy and the consumption good. We calculate the effects of variations in individual policy parameters, especially on energy prices and welfare costs, and determine the impact of exoge-nous fossil-fuel price shocks on the economy.

Suggested Citation

  • Rüdiger Pethig & Christian Wittlich, 2009. "Interaction of Carbon Reduction and Green Energy Promotion in a Small Fossil-Fuel Importing Economy," CESifo Working Paper Series 2749, CESifo.
    • Handle: RePEc:ces:ceswps:_2749
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    References listed on IDEAS

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    Cited by:

    1. Fischer, Carolyn & Preonas, Louis, 2010. "Combining Policies for Renewable Energy: Is the Whole Less Than the Sum of Its Parts?," International Review of Environmental and Resource Economics, now publishers, vol. 4(1), pages 51-92, June.
    2. 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.
    3. Fischer, Carolyn & Newell, Richard G. & Preonas, Louis, 2013. "Environmental and Technology Policy Options in the Electricity Sector: Interactions and Outcomes," RFF Working Paper Series dp-13-20, Resources for the Future.
    4. Yu‐Fu Chen & Michael Funke, 2010. "Booms, Recessions And Financial Turmoil: A Fresh Look At Investment Decisions Under Cyclical Uncertainty," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(3), pages 290-317, July.
    5. Christoph Böhringer & Manuela Behrens, 2015. "Interactions of emission caps and renewable electricity support schemes," Journal of Regulatory Economics, Springer, vol. 48(1), pages 74-96, August.
    6. Iyer, Gokul C. & Clarke, Leon E. & Edmonds, James A. & Hultman, Nathan E. & McJeon, Haewon C., 2015. "Long-term payoffs of near-term low-carbon deployment policies," Energy Policy, Elsevier, vol. 86(C), pages 493-505.
    7. Mengfei Jiang & Xi Liang & David Reiner & Boqiang Lin & Maosheng Duan, 2018. "Stakeholder Views on Interactions between Low-carbon Policies and Carbon Markets in China: Lessons from the Guangdong ETS," Working Papers EPRG 1805, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    8. Thomas Eichner & Rüdiger Pethig, 2015. "Efficient Management of Insecure Fossil Fuel Imports through Taxing Domestic Green Energy?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(5), pages 724-751, October.
    9. Thomas Eichner & Rüdiger Pethig, 2015. "Lobbying for and Against Subsidizing Green Energy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 925-947, December.
    10. Sebastian Schaefer, 2018. "Subsidizing Renewable Energy: Higher Welfare by lower depreciation costs for fossil power plants?," MAGKS Papers on Economics 201834, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    11. Gawel, Erik & Strunz, Sebastian & Lehmann, Paul, 2012. "The German Energiewende under attack: Is there an irrational Sonderweg?," UFZ Discussion Papers 15/2012, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    12. Sebastian Rausch and Valerie J. Karplus, 2014. "Markets versus Regulation: The Efficiency and Distributional Impacts of U.S. Climate Policy Proposals," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    13. Christoph Heinzel & Thomas Winkler, 2011. "Economic functioning and politically pragmatic justification of tradable green certificates in Poland," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(2), pages 157-175, June.
    14. Schäfer, Sebastian, 2019. "Decoupling the EU ETS from subsidized renewables and other demand side effects: lessons from the impact of the EU ETS on CO2 emissions in the German electricity sector," Energy Policy, Elsevier, vol. 133(C).
    15. Sijm, Jos & Lehmann, Paul & Chewpreecha, Unnada & Gawel, Erik & Mercure, Jean-Francois & Pollitt, Hector & Strunz, Sebastian, 2014. "EU climate and energy policy beyond 2020: Are additional targets and instruments for renewables economically reasonable?," UFZ Discussion Papers 3/2014, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    16. Sebastian Schaefer, 2018. "Reconciling Emissions Trading and the Promotion of Renewable Energy," MAGKS Papers on Economics 201836, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    17. del Río, Pablo, 2017. "Why does the combination of the European Union Emissions Trading Scheme and a renewable energy target makes economic sense?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 74(C), pages 824-834.
    18. Pablo Río, 2014. "On evaluating success in complex policy mixes: the case of renewable energy support schemes," Policy Sciences, Springer;Society of Policy Sciences, vol. 47(3), pages 267-287, September.

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    More about this item

    Keywords

    carbon reduction; green energy promotion; policy mix; interaction of policies;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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