Adjusting the CO2 cap to subsidised RES generation: Can CO2 prices be decoupled from renewable policy?

Adjusting the CO2 cap to subsidised RES generation: Can CO2 prices be decoupled from renewable policy?

Richstein, J.C.
Chappin, E.J.L.
De Vries, L.J.

Technology, Policy and Management

Engineering Systems and Services

2015-10-15

The low prices in the European Emission Trading System (EU ETS) have triggered discussions of various possible reforms. One option is to decouple the CO 2 prices from renewable energy policy by adjusting the emission cap to renewable energy investment overshoots. We introduce two ways of reducing the CO 2 cap in response to overshoots of renewable policy investment over previously announced targets. We investigate these options with the agent-based model EMLab-generation. We find that both policy implementations are successful in restoring prices. They also ensure that making public investments that exceed policy targets contribute to carbon emission reduction, and that renewable policy does not benefit the most emission-intensive power plants. However, neither policy is suitable for achieving specifc levels of prices or price volatility.

EU-ETS
carbon market
renewable policy
dynamic cap adjustment
agent-based modelling
electricity Market

http://resolver.tudelft.nl/uuid:5c6faee0-63c4-4724-bfe9-3f114b6bfd90

Elsevier

2017-10-16

Applied Energy, Volume 156, 15 October 2015, pages 693–702. Authors version

Institutional Repository

journal article

© The authors, 2015. This accepted manuscript version is made available under the CC-BY-NC-ND 4.0 license (http://creativecommons.org/licenses/by-nc-nd/4.0/).