Combining Policies for Renewable Energy:  Is the Whole Less than the Sum of Its Parts? Carolyn Fischer September 2010 Carb...
About RFF <ul><li>Independent, nonpartisan, nonprofit research institute in Washington, DC </li></ul><ul><li>Founded in 19...
Motivation for Thinking About Overlapping Renewable Policies <ul><li>Policymakers at all levels of government and around t...
Overlapping Policies for RES-E: Everything but the kitchen sink?
Useful Distinctions from an Economic Perspective <ul><li>Fixed-price measures </li></ul><ul><ul><li>Carbon  </li></ul></ul...
Combining Renewable Policies with a Cap-and-Trade System <ul><li>With a binding cap, zero incremental emissions reductions...
Combining Policies with Tradable Standards <ul><li>A binding renewable portfolio standard links the fates of fossil and no...
Rationales for Overlapping Policies How many tools do we need? <ul><li>Economic principle: Need as many tools as problems ...
Renewable Energy Policies as Innovation Policies <ul><li>Different sources have different needs </li></ul><ul><ul><li>Diff...
Concluding Thoughts <ul><li>Overlapping policies require overlapping problems to justify them </li></ul><ul><li>Policies s...
Thanks! <ul><li>Funders: </li></ul><ul><ul><li>Clipore Program of the Mistra Foundation </li></ul></ul><ul><ul><li>U.S. EP...
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Combining Policies for Renewable Energy: Is the Whole Less than the Sum of Its Parts?

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Combining Policies for Renewable Energy: Is the Whole Less than the Sum of Its Parts?

Carolyn Fischer
September 2010 Carbon TradeEx

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Combining Policies for Renewable Energy: Is the Whole Less than the Sum of Its Parts?

  1. 1. Combining Policies for Renewable Energy: Is the Whole Less than the Sum of Its Parts? Carolyn Fischer September 2010 Carbon TradeEx
  2. 2. About RFF <ul><li>Independent, nonpartisan, nonprofit research institute in Washington, DC </li></ul><ul><li>Founded in 1952 </li></ul><ul><li>Our mission: To improve environmental and natural resource policymaking worldwide through objective social science research of the highest caliber. </li></ul>
  3. 3. Motivation for Thinking About Overlapping Renewable Policies <ul><li>Policymakers at all levels of government and around the world have been enthusiastically supporting renewable energy </li></ul><ul><ul><li>Energy security </li></ul></ul><ul><ul><li>Environmental preservation </li></ul></ul><ul><ul><li>Innovation </li></ul></ul><ul><ul><li>Green jobs </li></ul></ul><ul><ul><li>Infant industries and industrial policy </li></ul></ul><ul><li>But do they recognize how policies interact? </li></ul>
  4. 4. Overlapping Policies for RES-E: Everything but the kitchen sink?
  5. 5. Useful Distinctions from an Economic Perspective <ul><li>Fixed-price measures </li></ul><ul><ul><li>Carbon </li></ul></ul><ul><ul><li>Fossil fuel taxes </li></ul></ul><ul><ul><li>Renewable subsidies </li></ul></ul><ul><li>Endogenous-price measures </li></ul><ul><ul><li>Cap-and-trade </li></ul></ul><ul><ul><li>Portfolio standards </li></ul></ul><ul><ul><li>Performance standards </li></ul></ul><ul><ul><li>Credit value adjusts to other market influences </li></ul></ul>
  6. 6. Combining Renewable Policies with a Cap-and-Trade System <ul><li>With a binding cap, zero incremental emissions reductions are realized from supplementary policies. </li></ul><ul><li>RES-E subsidies cause allowance prices to fall </li></ul><ul><ul><li>Tends to benefit dirtier emitters! </li></ul></ul><ul><ul><ul><li>i.e., coal-fired save more than natural gas-fired </li></ul></ul></ul><ul><ul><li>Less fossil energy generation overall </li></ul></ul><ul><ul><ul><li>Displaced by RES-E and lower prices </li></ul></ul></ul><ul><ul><li>None of the overlapping policies can simultaneously disadvantage both kinds of fossil generation </li></ul></ul>
  7. 7. Combining Policies with Tradable Standards <ul><li>A binding renewable portfolio standard links the fates of fossil and non-fossil energy </li></ul><ul><li>Supplementary policies that subsidize renewables make credits cheaper </li></ul><ul><ul><li>Benefits fossil energy suppliers </li></ul></ul><ul><ul><li>Expands overall consumption </li></ul></ul><ul><ul><ul><li>and emissions! (unless there’s also a cap) </li></ul></ul></ul><ul><li>Additional charges on fossil energy reduce demand for renewable credits </li></ul>
  8. 8. Rationales for Overlapping Policies How many tools do we need? <ul><li>Economic principle: Need as many tools as problems </li></ul><ul><ul><li>If GHGs only problem, an emissions price is the only tool needed; anything else raises costs </li></ul></ul><ul><ul><li>If RES-E share is only goal, then RPS by definition should be efficient </li></ul></ul><ul><li>Other market failures: </li></ul><ul><ul><li>R&D, learning-by-doing spillovers </li></ul></ul><ul><ul><li>Network effects </li></ul></ul><ul><ul><li>Barriers and information problems </li></ul></ul><ul><ul><li>Credit access constraints </li></ul></ul><ul><ul><li>Market power </li></ul></ul><ul><ul><li>Energy security… </li></ul></ul>
  9. 9. Renewable Energy Policies as Innovation Policies <ul><li>Different sources have different needs </li></ul><ul><ul><li>Different innovation stages, net emissions characteristics, capital cost structures, etc. </li></ul></ul><ul><li>Simple RPSs and production subsidies do not distinguish among sources </li></ul><ul><ul><li>Benefit currently commercial options; </li></ul></ul><ul><ul><li>Less effective at promoting next-generation technology </li></ul></ul><ul><ul><li>Empirical studies find FiTs more cost-effective ( OECD 2010) </li></ul></ul><ul><ul><li>Could have differentiated mandates </li></ul></ul><ul><li>Need to balance RD&D push with market pull policies </li></ul>
  10. 10. Concluding Thoughts <ul><li>Overlapping policies require overlapping problems to justify them </li></ul><ul><li>Policies should be evaluated in whole context </li></ul><ul><li>Fixed-price policies are more transparent: Additive </li></ul><ul><li>Must recognize tradeoffs between not picking winners and appropriately targeting innovation needs </li></ul><ul><ul><li>To what extent do market failures vary by technologies? </li></ul></ul><ul><li>Carbon price still the single most effective policy for GHG reduction, even with spillovers </li></ul>
  11. 11. Thanks! <ul><li>Funders: </li></ul><ul><ul><li>Clipore Program of the Mistra Foundation </li></ul></ul><ul><ul><li>U.S. EPA Science To Achieve Results </li></ul></ul><ul><li>For more information: </li></ul><ul><li>http://www.rff.org </li></ul>

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