Adjusting the CO2 cap to subsidised RES generation

Can CO2 prices be decoupled from renewable policy?

Journal article (2015)
Department
Engineering Systems and Services (TPM) (TU Delft)
Copyright: © 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/).
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Published Date

15-10-2015

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Source:

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

Faculty

Technology, Policy and Management

Department

Engineering Systems and Services

Abstract

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.