A public choice view on the climate and energy policy mix in the EU: How do the emissions trading scheme and support for renewable energies interact?
In this paper, we analyze the rationale for an energy policy mix when the European Emissions Trading scheme (ETS) is considered from a public choice perspective. That is, we argue that the economic textbook model of the ETS implausibly assumes 1) efficient policy design and 2) climate protection as the single objective of policy intervention. Contrary to these assumptions, we propose that the ETS originates from a political bargaining game within a context of multiple policy objectives. In particular, the emissions cap is negotiated between regulators and emitters with the emitters' abatement costs as crucial bargaining variable. This public choice view yields striking implications for an optimal policy mix comprising RES supporting policies. Whereas the textbook model implies that the ETS alone provides sufficient climate protection, our analysis suggests that support for renewable energies 1) contributes to a more effective ETS-design and 2) may even increase the overall efficiency of climate and energy policy if other externalities and policy objectives besides climate protection are considered. Thus, our analysis also shows that a public choice view not necessarily entails negative evaluations concerning efficiency and effectiveness of a policy mix.
|Date of creation:||2013|
|Contact details of provider:|| Postal: Permoserstraße 15, 04318 Leipzig|
Phone: ++49 - 0341 - 235-2771
Fax: ++49 - 0341 - 235-2825
Web page: http://www.ufz.de/index.php?en=1445
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Samuel Fankhauser & Cameron Hepburn & Jisung Park, 2010.
"Combining Multiple Climate Policy Instruments: How Not To Do It,"
Climate Change Economics (CCE),
World Scientific Publishing Co. Pte. Ltd., vol. 1(03), pages 209-225.
- Samuel Fankhauser & Cameron Hepburn & Jisung Park, 2011. "Combining multiple climate policy instruments: how not to do it," LSE Research Online Documents on Economics 37573, London School of Economics and Political Science, LSE Library.
- Samuel Fankhauser & Cameron Hepburn & Jisung Park, 2011. "Combining multiple climate policy instruments: how not to do it," GRI Working Papers 38, Grantham Research Institute on Climate Change and the Environment.
- Frondel, Manuel & Ritter, Nolan & Schmidt, Christoph M. & Vance, Colin, 2010. "Economic impacts from the promotion of renewable energy technologies: The German experience," Energy Policy, Elsevier, vol. 38(8), pages 4048-4056, August.
- Frondel, Manuel & Ritter, Nolan & Schmidt, Christoph M. & Vance, Colin, 2009. "Economic Impacts from the Promotion of Renewable Energy Technologies - The German Experience," Ruhr Economic Papers 156, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
- Ellerman Denny & Delarue Erik & Hannes Weigt, 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.
- Goldthau, Andreas & Sovacool, Benjamin K., 2012. "The uniqueness of the energy security, justice, and governance problem," Energy Policy, Elsevier, vol. 41(C), pages 232-240.
- Yu-Bong Lai, 2008. "Auctions or grandfathering: the political economy of tradable emission permits," Public Choice, Springer, vol. 136(1), pages 181-200, July.
- Markussen, Peter & Svendsen, Gert Tinggaard, 2005. "Industry lobbying and the political economy of GHG trade in the European Union," Energy Policy, Elsevier, vol. 33(2), pages 245-255, January.
- Kalkuhl, Matthias & Edenhofer, Ottmar & Lessmann, Kai, 2012. "Learning or lock-in: Optimal technology policies to support mitigation," Resource and Energy Economics, Elsevier, vol. 34(1), pages 1-23.
- Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2011. "Learning or Lock-in: Optimal Technology Policies to Support Mitigation," CESifo Working Paper Series 3422, CESifo Group Munich.
- 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.
- Lehmann, Paul & Gawel, Erik, 2011. "Why should support schemes for renewable electricity complement the EU emissions trading scheme?," UFZ Discussion Papers 5/2011, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
- Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
- Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
- Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135-135.
- Tol, Richard S.J., 2012. "A cost–benefit analysis of the EU 20/20/2020 package," Energy Policy, Elsevier, vol. 49(C), pages 288-295.
- Tol, Richard S. J., 2011. "A Cost-Benefit Analysis of the EU 20/20/2020 Package," Papers WP367, Economic and Social Research Institute (ESRI).
- Claudia Kemfert & Jochen Diekmann, 2009. "Emissions Trading and Promotion of Renewable Energy: We Need Both," Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 5(14), pages 95-100.
- Paul Lehmann & Felix Creutzig & Melf-Hinrich Ehlers & Nele Friedrichsen & Clemens Heuson & Lion Hirth & Robert Pietzcker, 2012. "Carbon Lock-Out: Advancing Renewable Energy Policy in Europe," Energies, MDPI, Open Access Journal, vol. 5(2), pages 1-32, February.
- Unruh, Gregory C., 2000. "Understanding carbon lock-in," Energy Policy, Elsevier, vol. 28(12), pages 817-830, October.
- Lori Bennear & Robert Stavins, 2007. "Second-best theory and the use of multiple policy instruments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(1), pages 111-129, May.
- Dieter Helm, 2010. "Government failure, rent-seeking, and capture: the design of climate change policy," Oxford Review of Economic Policy, Oxford University Press, vol. 26(2), pages 182-196, Summer.
- Frondel, Manuel & Ritter, Nolan & Schmidt, Christoph M., 2008. "Germany's solar cell promotion: Dark clouds on the horizon," Energy Policy, Elsevier, vol. 36(11), pages 4198-4204, November.
- Frondel, Manuel & Ritter, Nolan & Schmidt, Christoph M., 2008. "Germany's Solar Cell Promotion: Dark Clouds on the Horizon," Ruhr Economic Papers 40, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
- David Anthoff & Robert Hahn, 2010. "Government failure and market failure: on the inefficiency of environmental and energy policy," Oxford Review of Economic Policy, Oxford University Press, vol. 26(2), pages 197-224, Summer.
- Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
- Steffen Jenner, Gabriel Chan, Rolf Frankenberger, and Mathias Gabel, 2012. "What Drives States to Support Renewable Energy?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
- Gawel, Erik & Strunz, Sebastian & Lehmann, Paul, 2013. "Polit-ökonomische Grenzen des Emissionshandels und ihre Implikationen für die klima- und energiepolitische Instrumentenwahl," UFZ Discussion Papers 2/2013, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
- Jensen, Stine Grenaa & Skytte, Klaus, 2003. "Simultaneous attainment of energy goals by means of green certificates and emission permits," Energy Policy, Elsevier, vol. 31(1), pages 63-71, January.
- Heindl, Peter & Löschel, Andreas, 2012. "Designing emissions trading in practice general considerations and experiences from the EU Emissions Trading Scheme (EU ETS)," ZEW Discussion Papers 12-009, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. Full references (including those not matched with items on IDEAS)