The dynamic impact of carbon reduction and renewable support policies on the electricity sector |
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| Affiliation: | 1. Donlinks School of Economics and Management, University of Science and Technology Beijing, Beijing 100083, China;2. School of Environmental and Municipal Engineering, Xi''an University of Architecture and Technology, No 13 Yanta Road, Xi''an 710055, China;3. School of Labor Economics, Capital University of Economics and Business, Beijing 10070, China;4. Institute for Energy, Environment and Sustainable Communities, University of Regina, Regina, Saskatchewan S4S 0A2, Canada;5. School of Environment, Beijing Normal University, Beijing 100875, China |
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| Abstract: | Carbon reduction and renewable energy policies are implemented in Europe to improve the sustainability of the electricity sector while achieving security of supply. We investigate the interactions between these policies using a dynamic investment model. Our analysis indicates that both policies are necessary to achieve a sustainable power sector. However, renewable energy generation significantly affects carbon markets and could lead to very low prices. These would attract investments in carbon intensive technologies, locking the sector into future higher emissions. To contrast this effect, policy makers may introduce a floor price in the carbon market or adjust the emissions quota periodically. |
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| Keywords: | Electricity sector EU ETS Renewable energy policy Dynamic policy interaction |
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