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

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...

The market (in-)stability reserve for EU carbon emission trading: Why it might fail and how to improve it

The EU parliament has accepted a proposal of the EU commission on the backloading of EU emission allowances (EUA), where the auctioning of EUAs is postponed to future time periods. The EU commission has also proposed a market stability reserve (MSR), which is a quantity-based stabilisation policy that is aimed at controlling the volume of EUAs...

Designing the market design for the electricity system of the future

In many countries, the characteristics of the electricity supply system are changing. Important developments that are unfolding in the electricity sector are (i) the growth of generation from renewable sources (PV, wind) that are less controllable than traditional power plants and that for a large part feed in into the distribution grids, and ...

The Stability Reserve in EU Carbon Emission Trading: Does it Deliver What it Promises?

In recent years the Europe Unions emission trading system (EU ETS) has experienced very low prices. This has triggered a political discussion about stabilising the EU ETS and improving incentives for investing in CO2 abatement. As a result of this discussion, the EU parliament accepted a proposal of the EU commission on the backloading of EU...

Cross-border electricity market effects due to price caps in an emission trading system: An agent-based approach

The recent low CO2 prices in the European Union Emission Trading Scheme (EU ETS) have triggered a discussion whether the EU ETS needs to be adjusted. We study the effects of CO2 price floors and a price ceiling on the dynamic investment pathway of two interlinked electricity markets (loosely based on Great Britain, which already has introduced a...

Understanding power plant investment decision processes

In order to understand how companies make investment decisions under conditions of deep uncertainty, we interviewed a number of actors in the Dutch electricity sector. Most of the economic literature that is devoted to this question is prescriptive in nature, describing rational methods to the investment decision process (such as real options...