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The European Electricity and Climate Policy—Complement or Substitute?

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  • Claudia Kemfert

    (German Institute for Economic Research, Humboldt University, Königin Luise Strasse 5, D-14195 Berlin, Germany)

Abstract

The European electricity policy is intended to increase market competitiveness and liberalisation. The European climate policy is directed toward substantial reductions in greenhouse-gas emission and a significant increase in the use of renewable energy for electricity production. Both policies affect European utilities considerably. As a consequence, only those utilities that can produce electricity with cost-efficient and environment-friendly technologies will gain a comparative market advantage. The author investigates the impacts of the European energy and climate policy initiatives on the electricity market. It emerges that emissions trading leads to higher electricity prices and triggers a substitution process—from the use of coal to the use of gas and renewable technologies. Both policies have complementary effects, but only because the electricity market is not yet fully competitive.

Suggested Citation

  • Claudia Kemfert, 2007. "The European Electricity and Climate Policy—Complement or Substitute?," Environment and Planning C, , vol. 25(1), pages 115-130, February.
    • Handle: RePEc:sae:envirc:v:25:y:2007:i:1:p:115-130
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    Cited by:

    1. Langni, Ole & Diekmann, Jochen & Lehr, Ulrike, 2009. "Advanced mechanisms for the promotion of renewable energy--Models for the future evolution of the German Renewable Energy Act," Energy Policy, Elsevier, vol. 37(4), pages 1289-1297, April.
    2. Lopez, Neil Stephen A. & Foo, Dominic C.Y. & Tan, Raymond R., 2021. "Optimizing regional electricity trading with Carbon Emissions Pinch Analysis," Energy, Elsevier, vol. 237(C).
    3. El Khatib, Sameh & Galiana, Francisco D., 2019. "Investigating emission regulation policy in the electricity sector: modeling an oligopolistic electricity market under hourly cap-and-trade," Energy Economics, Elsevier, vol. 78(C), pages 428-443.
    4. Thure Traber & Claudia Kemfert, 2007. "Impacts of the German Support for Renewable Energy on Electricity Prices, Emissions and Profits: An Analysis Based on a European Electricity Market Model," Discussion Papers of DIW Berlin 712, DIW Berlin, German Institute for Economic Research.

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