Mercado energy

The Interaction of Renewable Quotas and Emission Trading
Jan Abrell Hannes Weigt

EE²
Dresden University of Technology Chair of Energy Economics and Public Sector Management
7th Conference onApplied Infrastructure Research 11.10.2008, Berlin
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Europe in its 20s
205 means:

20% share of renewables in primary energy consumption (and 10% biofuels)

20% increase of energy efficiency20% reduction of CO2 (compared to 1990): -50-80% by 2050 - Current mindset: 450 ppm CO2e, ~ 400 ppm CO2

...by 2020

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Agenda

1. Introduction 2. Model Description 3. Results 4.Conclusion Literature

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European Emission Trading System
European Emission Trading System (EU ETS) started in 2005

Covers about 12.000 installations of energy producing and energy intensiveindustries

Classical cap-and-trade system:
- Set emission target - Allocate emission permit to installations - Allow trade of emission permits

Emission target: Reduction of 20% in 2020 (comparedto 1990)

Permit allocation: Mainly grandfathering but also auctions
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Promotion of Renewable Energies
Renewable energies are supposed to have learning effects Thus, chicken and egg problemas well as social suboptimal investments Target: 20% renewable energy of primary energy consumption EU: 70s and 80s focused on support of research and development Since 90s focus on implementation:Quotas and tradable green certificates: apply market mechanisms, higher investment risk, potential lower learning effects for high cost RES Feed-In tariffs: allow a differentiated treatment of RES, morecostly, low investment risk
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Source: EU, 2008

Overview of Instruments: Quotas or Tariffs, and supporting instruments
Country
Austria Belgium Czech Republic Denmark Finland France GermanyHungary Italy Netherlands Poland Portugal Slovak Republic Sweden Spain United Kingdom

Support Policies
Feed-in tariffs, tax exemptions, investment incentives Obligatory targets and fallback...