The Interaction of Emissions Trading and Renewable Energy Promotion

Abrell, Jan and Weigt, Hannes (2008): The Interaction of Emissions Trading and Renewable Energy Promotion.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: ETS; renewable support; Germany; CGE
• Subjects: D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D58 - Computable and Other Applied General Equilibrium Models; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L94 - Electric Utilities; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q42 - Alternative Energy Sources; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects

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