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The Interaction of Emissions Trading and Renewable Energy Promotion

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  • Abrell, Jan
  • Weigt, Hannes

Abstract

Given the ambitious goal of the European Union to achieve CO2 emission reduction, support to renewable energies, and increased energy efficiency a portfolio of different policies is going to be implemented or is already in place in the member states. These instruments have at least partly overlapping objectives; thus, a high degree of interaction is to be expected. In this paper we analyze how the EU ETS and renewable support mechanisms influence one another. We apply a static open economy computable general equilibrium (CGE) model of Germany incorporating different conventional and renewable generation technologies. We find that in case of an ETS with a green certificate trading scheme or a feed-in system the price for carbon drops to zero due to the high share of CO2-neutral renewable generation. Furthermore, the welfare reducing effect of an additional renewable support mechanism is rather low for both schemes.

Suggested Citation

  • Abrell, Jan & Weigt, Hannes, 2008. "The Interaction of Emissions Trading and Renewable Energy Promotion," MPRA Paper 65658, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:65658
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Oskar Lecuyer & Ruben Bibas, 2011. "Combining climate and energy policies: synergies or antagonisms?," Post-Print hal-00801917, HAL.
    2. Lehmann, Paul, 2013. "Supplementing an emissions tax by a feed-in tariff for renewable electricity to address learning spillovers," Energy Policy, Elsevier, vol. 61(C), pages 635-641.
    3. Jan Christian Schinke, 2011. "The no cost emission saving policy," EcoMod2011 2958, EcoMod.
    4. Christoph Böhringer & Knut Einar Rosendahl, 2009. "Green Serves the Dirtiest: On the Interaction between Black and Green Quotas," CESifo Working Paper Series 2837, CESifo Group Munich.
    5. Oskar Lecuyer & Ruben Bibas, 2012. "Combining climate and energy policies : synergies or antagonism ? Modeling interactions with energy efficiency instruments," CIRED Working Papers hal-00866439, HAL.
    6. Ellerman, Danny & Delarue, Erik & Weigt, Hannes, 2012. "CO2 Abatement from RES Injections in the German Electricity Sector: Does a CO2 Price Help?," Working papers 2012/14, Faculty of Business and Economics - University of Basel.
    7. Francesco Crespi, 2016. "Policy complexity and the green transformation of the economies as an emergent system property," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(2), pages 143-157, April.
    8. 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.
    9. De Jonghe, Cedric & Delarue, Erik & Belmans, Ronnie & D'haeseleer, William, 2009. "Interactions between measures for the support of electricity from renewable energy sources and CO2 mitigation," Energy Policy, Elsevier, vol. 37(11), pages 4743-4752, November.
    10. Weigt, Hannes & Ellerman, Denny & Delarue, Erik, 2013. "CO2 abatement from renewables in the German electricity sector: Does a CO2 price help?," Energy Economics, Elsevier, vol. 40(S1), pages 149-158.
    11. Oskar Lecuyer & Ruben Bibas, 2011. "Combining Climate and Energy Policies: Synergies or Antagonism? Modeling Interactions With Energy Efficiency Instruments," Working Papers 2011.98, Fondazione Eni Enrico Mattei.
    12. 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.
    13. Kažukauskas, Andrius & Jaraite, Jurate, 2011. "The Profitability of Power Generating Firms and Policies Promoting Renewable Energy," CERE Working Papers 2011:14, CERE - the Center for Environmental and Resource Economics.
    14. Oskar Lecuyer & Ruben Bibas, 2012. "Combining climate and energy policies : synergies or antagonism ? Modeling interactions with energy efficiency instruments," Working Papers hal-00866439, HAL.
    15. 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 Group Munich.
    16. Bird, Lori & Chapman, Caroline & Logan, Jeff & Sumner, Jenny & Short, Walter, 2011. "Evaluating renewable portfolio standards and carbon cap scenarios in the U.S. electric sector," Energy Policy, Elsevier, vol. 39(5), pages 2573-2585, May.
    17. Zhao, Yong & Tang, Kam Ki & Wang, Li-li, 2013. "Do renewable electricity policies promote renewable electricity generation? Evidence from panel data," Energy Policy, Elsevier, vol. 62(C), pages 887-897.
    18. repec:eee:enepol:v:129:y:2019:i:c:p:1320-1330 is not listed on IDEAS
    19. Christoph Böhringer & Knut Rosendahl, 2010. "Green promotes the dirtiest: on the interaction between black and green quotas in energy markets," Journal of Regulatory Economics, Springer, vol. 37(3), pages 316-325, June.
    20. repec:eee:energy:v:185:y:2019:i:c:p:1197-1209 is not listed on IDEAS
    21. Weigt, Hannes, 2009. "A Review of Liberalization and Modeling of Electricity Markets," MPRA Paper 65651, University Library of Munich, Germany.
    22. repec:eee:enepol:v:117:y:2018:i:c:p:86-99 is not listed on IDEAS
    23. Spyridaki, N.-A. & Flamos, A., 2014. "A paper trail of evaluation approaches to energy and climate policy interactions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 40(C), pages 1090-1107.
    24. 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.

    More about this item

    Keywords

    ETS; renewable support; Germany; CGE;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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