Interaction of carbon reduction and green energy promotion in a small fossil-fuel importing economy
We study the incidence of carbon-reduction and green-energy promotion policies in a general equilibrium small open economy that depends on imports of fossil fuels. The focus is on mixed policies that are either price based (emissions taxes and producer price subsidies for green energy) or quantity based (schemes of trading emissions and green certificates). Policy instruments directed head-on toward promoting green energy are shown to also reduce carbon emissions and vice versa but the direct effects are stronger than the side effects, the more so, the greater is the elasticity of substitution in consumption between energy and consumption goods. We calculate the effects of variations in individual policy parameters on all endogenous variables, among them the energy price and the welfare costs. We also determine the impact of exogenous fossil-fuel price shocks on the economy.
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- Torstein Bye & Annegrete Bruvoll, 2008. "Multiple instruments to change energy behaviour: The emperor’s new clothes?," Discussion Papers 549, Research Department of Statistics Norway.
- Fischer, Carolyn & Newell, Richard G., 2008.
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- Steven Sorrell, 2003. "Carbon Trading in the Policy Mix," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 420-437.
- Rathmann, M., 2007. "Do support systems for RES-E reduce EU-ETS-driven electricity prices?," Energy Policy, Elsevier, vol. 35(1), pages 342-349, January.
- Fischer, Carolyn, 2006. "How Can Renewable Portfolio Standards Lower Electricity Prices?," Discussion Papers dp-06-20, Resources For the Future.
- Klaus Skytte, 2006. "Interplay between Environmental Regulation and Power Markets," EUI-RSCAS Working Papers 4, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
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