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A Public Choice View on the Climate and Energy Policy Mix in the EU: How Do the Emissions Trading Scheme and Support for Renewable Energies Interact?

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The European Dimension of Germany’s Energy Transition

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Abstract

In this paper, we analyze the rationale for an energy policy mix when the European Emissions Trading Scheme (ETS) is considered from a public choice perspective. That is, we argue that the economic textbook model of the ETS implausibly assumes (1) efficient policy design and (2) climate protection as the single objective of policy intervention. Contrary to these assumptions, we propose that the ETS originates from a political bargaining game within a context of multiple policy objectives. In particular, the emission cap is negotiated between regulators and emitters with the emitters’ abatement costs as crucial bargaining variable. This public choice view yields striking implications for an optimal policy mix comprising RES supporting policies. Whereas the textbook model implies that the ETS alone provides sufficient climate protection, our analysis suggests that support for renewable energies (1) contributes to a more effective ETS design and (2) may even increase the overall efficiency of climate and energy policy if other externalities and policy objectives besides climate protection are considered. Thus, our analysis also shows that a public choice view not necessarily entails negative evaluations concerning efficiency and effectiveness of a policy mix.

This article has first been published as Gawel, E., et al. (2014). A public choice view on the climate and energy policy mix in the EU – how do emissions trading scheme and support for renewable energies interact? Energy Policy 64: 175–182.

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Notes

  1. 1.

    Often public bureaucrats are included as a fourth actor group. Yet in this paper, we do not analyze the specific effects of bureaucrats’ involvement in policy design. Note, however, that adding bureaucrats would only contribute to our argument that policy design should be assumed to be far from optimal.

  2. 2.

    For instance, Weigt et al. (2012) show that between 2006 and 2010, German RES production reduced CO2 emissions from the German electricity sector by 10–16% compared to a scenario without RES.

  3. 3.

    In Eq. (4), the first term on the right hand side contains a problematic circularity in that K depends on Ē, which in turn depends on K.

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Author information

Authors and Affiliations

  1. Department of Economics, Helmholtz Centre for Environmental Research – UFZ, Leipzig, Germany

    Erik Gawel, Sebastian Strunz & Paul Lehmann

  2. Institute for Infrastructure and Resources Management, Leipzig University, Leipzig, Germany

    Erik Gawel & Paul Lehmann

Authors
  1. Erik Gawel
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  2. Sebastian Strunz
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  3. Paul Lehmann
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Corresponding author

Correspondence to Sebastian Strunz .

Editor information

Editors and Affiliations

  1. Department of Economics, Helmholtz Centre for Environmental Research – UFZ, Leipzig, Germany

    Erik Gawel

  2. Department of Economics, Helmholtz Centre for Environmental Research – UFZ, Leipzig, Germany

    Sebastian Strunz

  3. Department of Economics, Helmholtz Centre for Environmental Research – UFZ, Leipzig, Germany

    Paul Lehmann

  4. Department of Economics, Helmholtz Centre for Environmental Research – UFZ, Leipzig, Germany

    Alexandra Purkus

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Gawel, E., Strunz, S., Lehmann, P. (2019). A Public Choice View on the Climate and Energy Policy Mix in the EU: How Do the Emissions Trading Scheme and Support for Renewable Energies Interact?. In: Gawel, E., Strunz, S., Lehmann, P., Purkus, A. (eds) The European Dimension of Germany’s Energy Transition. Springer, Cham. https://doi.org/10.1007/978-3-030-03374-3_22

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  • DOI: https://doi.org/10.1007/978-3-030-03374-3_22

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