Journal
APPLIED ENERGY
Volume 156, Issue -, Pages 693-702Publisher
ELSEVIER SCI LTD
DOI: 10.1016/j.apenergy.2015.07.024
Keywords
EU-ETS; Carbon market; Renewable policy; Dynamic cap adjustment; Agent-based modelling; Electricity market
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Funding
- European Commission
- Energy Delta Gas Research program - Understanding gas sector intra-market and inter-market interactions [A1]
- Knowledge for Climate program, project INCAH - Infrastructure Climate Adaptation in Hotspots
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The low prices in the European Emission Trading System (EU ETS) have triggered discussions of various possible reforms. One option is to decouple the CO2 prices from renewable energy policy by adjusting the emission cap to renewable energy investment overshoots. We introduce two ways of reducing the CO2 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. (C) 2015 Elsevier Ltd. All rights reserved.
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