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Refunding ETS-Proceeds to Spur the Diffusion of Renewable Energies: An Analysis Based on the Dynamic Oligopolistic Electricity Market Model EMELIE

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  • Thure Traber
  • Claudia Kemfert

Abstract

We use a quantitative electricity market model to analyze the welfare effects of refunding a share of the emission trading proceeds to support renewable energy technologies that are subject to experience effects. We compare effects of supporting renewable energies under both perfect and oligopolistic competition with competitive fringe firms and emission trading regimes that achieve 70 and 80 percent emission reductions by 2050. The results indicate the importance of market power for renewable energy support policy. Under imperfect competition welfare improvements is maximized by refunding ten percent of the emission trading proceeds, while under perfect competition the optimal refunding share is only five percent. However, under both behavioral assumptions we find significant welfare improvements due to experience effects which are induced by the support for renewable energy.

Suggested Citation

  • Thure Traber & Claudia Kemfert, 2009. "Refunding ETS-Proceeds to Spur the Diffusion of Renewable Energies: An Analysis Based on the Dynamic Oligopolistic Electricity Market Model EMELIE," Discussion Papers of DIW Berlin 951, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp951
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    1. Michael Pahle & Kai Lessmann & Ottmar Edenhofer & Nico Bauer, 2013. "Investments in Imperfect Power Markets under Carbon Pricing: A Case Study Based Analysis," The Energy Journal, , vol. 34(4), pages 199-228, October.
    2. A. Schröder & T. Traber & C. Kemfert, 2013. "Market Driven Power Plant Investment Perspectives In Europe: Climate Policy And Technology Scenarios Until 2050 In The Model Emelie-Esy," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 4(supp0), pages 1-22.

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    Keywords

    emission trading; renewable energy support; experience effects; imperfect competition;
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