EU climate policy , growth uncertainty , overlapping regulation
Abstract:
Current climate and energy policy has to operate under an ex-ante unforeseen
economic crisis. An obvious consequence is the collapse of prices for carbon emission
allowances as, for example, seen in the European Union. However, this price collapse
may be amplified by the interaction of a carbon emission cap and supplementary policy
targets such as the minimum shares for renewables in the power sector. The static
interaction between climate and renewable policies has been discussed extensively.
This paper extends this debate by analysing how uncertain differences in medium
to long-run growth rates affect the efficiency and effectiveness of a policy portfolio
containing an emission trading scheme and a target for a minimum renewable share.
Making use of a simple partial equilibrium model we identify an asymmetric interaction
of emissions trading and renewable quotas with respect to different growth
rates of an economy. The results imply that unintended consequences of the policy
interaction may be particularly severe and costly when economic growth is low and
that carbon prices are more sensitive to changes in economic growth if they are
applied in combination with renewable energy targets. Our main example for the
policy interaction is the EU, yet our research also relates particularly well to the
uncertainty of economic growth in fast growing emerging economies like China.
Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.
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