EU Climate and Energy Policy Beyond 2020: Are Additional Targets and Instruments for Renewables Economically Reasonable?

  • Paul LehmannEmail author
  • Erik Gawel
  • Sebastian Strunz


The European Union has decided to increase its target for greenhouse gas emissions reductions to 40% by 2030, compared to 1990 emissions levels. In contrast, the target for the share of renewable energy sources in electricity consumption—even though increased to 27%—will not be binding anymore for Member States beyond 2020. This is in line with many existing assessments which demonstrate that additional RES policies impair the cost-effectiveness of addressing a single CO2 externality, and should therefore be abolished. Our analysis explores to what extent this reasoning holds in a second-best setting with multiple externalities related to fossil and nuclear power generation and policy constraints. In this context, an additional RES policy may help to address externalities for which first-best policy responses are not available. In addition, we also argue that an unambiguous, “objective” economic assessment is impossible because (i) policies may have a multiplicity of impacts, (ii) the size of these impacts is subject to uncertainties and (iii) their valuation is contingent on individual preferences. Thus, the eventual decision on the optimal choice and design of climate and energy policies can only be taken politically.


  1. Alanne, K., & Saari, A. (2006). Distributed energy generation and sustainable development. Renewable and Sustainable Energy Reviews, 10, 539–558.Google Scholar
  2. Anger, N., Asane-Otoo, E., Böhringer, C., & Oberndorfer, U. (2016). Public Interest vs. Interest Groups: Allowance Allocation in the EU Emissions Trading Scheme. International Environmental Agreements: Politics, Law and Economics, 16, 621–637.Google Scholar
  3. Argote, L., & Epple, D. (1990). Learning curves in manufacturing. Science, 247, 920–924.Google Scholar
  4. Aune, R., Dalen, H. M., & Hagem, C. (2012). Implementing the EU renewable target through green certificate markets. Energy Economics, 34, 992–1000.Google Scholar
  5. Bennear, L. S., & Stavins, R. N. (2007). Second-best theory and the use of multiple policy instruments. Environmental and Resource Economics, 37, 111–129.Google Scholar
  6. Bernard, A., & Vielle, M. (2009). Assessment of European Union transition scenarios with a special focus on the issue of carbon leakage. Energy Economics, 31, S274–S284.Google Scholar
  7. Bjørner, T. B., & Mackenhauer, J. (2013). Spillover from private energy research. Resource and Energy Economics, 35, 171–190.Google Scholar
  8. Bläsi, A., & Requate, T. (2007). Subsidies for wind power: Surfing down the learning curve?, CAU Economic Working Paper. Christian-Albrechts-Universität Kiel, Kiel.Google Scholar
  9. Bläsi, A., & Requate, T. (2010). Feed-in-tariffs for electricity from renewable energy resources to move down the learning curve? Public Finance and Management, 10, 213–250.Google Scholar
  10. Boeters, S., & Koornneef, J. (2011). Supply of renewable energy sources and the cost of EU climate policy. Energy Economics, 33, 1024–1034.Google Scholar
  11. Bohi, D. R., & Toman, M. A. (1996). Economics of energy security. Norwell, MA: Kluwer.Google Scholar
  12. Böhringer, C., & Rosendahl, K. E. (2010). Green promotes the dirtiest: On the interaction between black and green quotas in energy markets. Journal of Regulatory Economics, 37, 316–325.Google Scholar
  13. Böhringer, C., & Rosendahl, K. E. (2011). Greening electricity more than necessary: On the cost implications of overlapping regulation in EU climate policy. Schmollers Jahrbuch, 131, 469–492.Google Scholar
  14. Böhringer, C., Löschel, A., Moslener, U., & Rutherford, T. F. (2009a). EU climate policy up to 2020: An economic impact assessment. Energy Economics, 31, S295–S305.Google Scholar
  15. Böhringer, C., Rutherford, T. F., & Tol, R. S. J. (2009b). The EU 20/20/2020 targets: An overview of the EMF22 assessment. Energy Economics, 31, 268–273.Google Scholar
  16. Bollinger, B., & Gillingham, K. (2014). Learning-by-doing in solar photovoltaic installations. Discussion Paper. Yale University, New Haven, CT.Google Scholar
  17. Borenstein, S. (2012). The private and public economics of renewable electricity generation. Journal of Economic Perspectives, 26, 67–92.Google Scholar
  18. Braun, F. G., Schmidt-Ehmcke, J., & Zloczysti, P. (2010). Innovative activity in wind and solar technology: Empirical evidence on knowledge spillovers using patent data. Discussion Paper. Deutsches Institut für Wirtschaftsforschung (DIW), Berlin.Google Scholar
  19. Canton, J., & Johannesson Lindén, A. (2010). Support schemes for renewable electricity in the EU, Economic Papers. European Commission, Brussels.Google Scholar
  20. Capros, P., Mantzos, L., Papandreou, V., & Tasios, N. (2008). Model-based analysis of the 2008 EU policy package on climate change and renewables. Report to the European Commission – DG ENV.Google Scholar
  21. Capros, P., Mantzos, L., Parousos, L., Tasios, N., Klaassen, G., & van Ierland, T. (2011). Analysis of the EU policy package on climate change and renewables. Energy Policy, 39, 1476–1485.Google Scholar
  22. Creutzig, F., Goldschmidt, J. C., Lehmann, P., Schmid, E., von Blücher, F., Breyer, C., Fernandez, B., Jakob, M., Knopf, B., Lohrey, S., Susca, T., & Wiegandt, K. (2014). Catching two European birds with one renewable stone: Mitigating climate change and Eurozone crisis by an energy transition. Renewable and Sustainable Energy Reviews, 38, 1015–1028.Google Scholar
  23. Dechezleprêtre, A., Martin, R., & Mohnen, M. (2013). Knowledge spillovers from clean and dirty technologies: A patent citation analysis. Discussion Paper. London School of Economics (LSE), London.Google Scholar
  24. Demsetz, H. (1969). Information and efficiency: Another viewpoint. Journal of Law and Economics, 12, 1–22.Google Scholar
  25. Edenhofer, O., Hirth, L., Knopf, B., Pahle, M., Schlömer, S., Schmid, E., & Ueckerdt, F. (2013a). On the economics of renewable energy sources. Energy Economics, 40, S12–S23.Google Scholar
  26. Edenhofer, O., Knopf, B., & Luderer, G. (2013b). Reaping the benefits of renewables in a nonoptimal world. Proceedings of the National Academy of Sciences, 110, 11666–11667.Google Scholar
  27. Edenhofer, O., Seyboth, K., Creutzig, F., & Schlömer, S. (2013c). On the sustainability of renewable energy sources. Annual Review of Environment and Resources, 38, 16.11–16.32.Google Scholar
  28. Ellis, J. (2010). The effects of fossil-fuel subsidy reform: A review of modelling and empirical studies, Untold billions: fossil-fuel subsidies, their impacts and the path to reform. Winnipeg: International Institute for Sustainable Development (IISD).Google Scholar
  29. Epstein, P. R., Buonocore, J. J., Eckerle, K., Hendryx, M., Stout, B. M. I., Heinberg, R., Clapp, R. W., May, B., Reinhart, N. L., Ahern, M. M., Doshi, S. K., & Glustrom, L. (2011). Full cost accounting for the life cycle of coal. Annals of the New York Academy of Sciences, 1219, 73–98.Google Scholar
  30. European Commission. (2008). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: 20 20 by 2020 – Europe’s climate change opportunity.Google Scholar
  31. European Commission. (2011). Communication from the commission to the European parliament, the council, the European economic and social committee and the committee of the regions: Energy roadmap 2050. European Commission, Brussels.Google Scholar
  32. European Commission. (2014a). Commission staff working document: Impact assessment accompanying the document communication from the commission to the European parliament, the council, the European economic and social committee and the committee of the regions “A policy framework for climate and energy in the period from 2020 up to 2030”. European Commission, Brussels.Google Scholar
  33. European Commission. (2014b). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the regions: A policy framework for climate and energy in the period from 2020 to 2030. COM(2014) 15 final. European Commission, Brussels.Google Scholar
  34. European Council. (2014). European Council (23 and 24 October 2014) – Conclusions. EUCO 169/14. European Council, Brussels.Google Scholar
  35. EWI, IE, RWI. (2004). Gesamtwirtschaftliche, sektorale und ökologische Auswirkungen des Erneuerbare Energien Gesetzes (EEG) – Gutachten im Auftrag des Bundesministeriums für Wirtschaft und Arbeit (BMWA). Energiewirtschaftliches Institut an der Universität zu Köln (EWI), Institut für Energetik & Umwelt gGmbH (IE), Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Köln, Leipzig, Essen.Google Scholar
  36. Fischer, C. (2008). Emissions pricing, spillovers, and public investment in environmentally friendly technologies. Energy Economics, 30, 487–502.Google Scholar
  37. Fischer, C., & Newell, R. G. (2008). Environmental and technology policies for climate change mitigation. Journal of Environmental Economics and Management, 55, 142–162.zbMATHGoogle Scholar
  38. Flues, F., Löschel, A., Lutz, B. J., & Schenker, O. (2014). Designing an EU energy and climate policy portfolio for 2030: Implications of overlapping regulation under different levels of electricity demand. Energy Policy, 75, 91–99.Google Scholar
  39. Frondel, M., Ritter, N., & Schmidt, C. M. (2008). Germany’s solar cell promotion: Dark clouds on the horizon. Energy Policy, 36, 4198–4204.Google Scholar
  40. Frondel, M., Ritter, N., Schmidt, C. M., & Vance, C. (2010). Economic impacts from the promotion of renewable energy technologies: The German experience. Energy Policy, 38, 4048–4056.Google Scholar
  41. Garrone, P., Piscitello, L., & Wang, Y. (2010). Innovation dynamics in the renewable energy sector: The role of cross-country spillovers. USAEE Working Paper.Google Scholar
  42. Gawel, E., Strunz, S., & Lehmann, P. (2014). 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? Energy Policy, 64, 175–182.Google Scholar
  43. Gawel, E., Lehmann, P., Purkus, A., Söderholm, P., & Witte, K. (2017). Rationales for technology-specific RES support and their relevance for German policy. Energy Policy, 102, 16–26.Google Scholar
  44. Gillingham, K., & Sweeney, J. L. (2010). Market failure and the structure of externalities. In B. Moselle, R. Schmalensee, & A. J. Padilla (Eds.), Harnessing renewable energy in electric power systems: Theory, practice, policy. Washington, DC: Johns Hopkins University Press.Google Scholar
  45. Goldthau, A., & Sovacool, B. K. (2012). The uniqueness of the energy security, justice, and governance problem. Energy Policy, 41, 232–240.Google Scholar
  46. Hansen, J. D., Jensen, C., & Madsen, E. S. (2003). The establishment of the Danish windmill industry – was it worthwhile? Review of World Economics, 139, 324–347.Google Scholar
  47. Heyes, A., & Heyes, C. (2000). An empirical analysis of the nuclear liability act (1970) in Canada. Resource and Energy Economics, 22, 91–101.Google Scholar
  48. Hillebrand, B., Buttermann, H. G., Behringer, J. M., & Bleuel, M. (2006). The expansion of renewable energies and employment effects in Germany. Energy Policy, 34, 3484–3494.Google Scholar
  49. Hirth, L., Ueckerdt, F., & Edenhofer, O. (2015). Integration costs revisited – An economic framework of wind and solar variability. Renewable Energy, 74, 925–939.Google Scholar
  50. IEA. (2000). Experience curves for technology policy. Paris: International Energy Agency (IEA).Google Scholar
  51. IEA/OPEC/OECD/World Bank. (2010). Analysis of the scope of energy subsidies and suggestions for the G-20 initiative. International Energy Agency (IEA), Organization for Petroleum Exporting Countries (OPEC), Organisation for Economic Co-operation and Development (OECD), World Bank, Toronto.Google Scholar
  52. IPCC. (2011). IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation. Prepared by Working Group III of the Intergovernmental Panel on Climate Change. In O. Edenhofer, R. Pichs-Madruga, Y. Sokona, K. Seyboth, P. Matschoss, S. Kadner, T. Zwickel, P. Eickemeier, G. Hansen, S. Schlömer, C. von Stechow (Eds.). Cambridge University Press, Cambridge, UK and New York, USA.Google Scholar
  53. IPCC. (2014). Summary for Policymakers. In O. Edenhofer, R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlömer, C. von Stechow, T. Zwickel, J. C. Minx (Eds.), Climate Change 2014, Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge University Press, Cambridge, UK and New York, USA.Google Scholar
  54. Irwin, D. A., & Klenow, P. J. (1994). Learning-by-doing spillovers in the semiconductor industry. Journal of Political Economy, 102, 1200–1227.Google Scholar
  55. Jaffe, A. B., Newell, R. G., & Stavins, R. N. (2005). A tale of two market failures: Technology and environmental policy. Ecological Economics, 54, 164–174.Google Scholar
  56. Jägemann, C., Fürsch, M., Hagspiel, S., & Nagl, S. (2013). Decarbonizing Europe’s power sector by 2050 — Analyzing the economic implications of alternative decarbonization pathways. Energy Economics, 40, 622–636.Google Scholar
  57. Jensen, S. G., & Skytte, K. (2003). Simultaneous attainment of energy goals by means of green certificates and emission permits. Energy Policy, 31, 63–71.Google Scholar
  58. Johansson, T. B., Nakicenovic, N., Patwardhan, A., & Gomez-Echeverri, L. (2012). Global energy assessment. Cambridge: Cambridge University Press.Google Scholar
  59. Junginger, M., Faaij, A., & Turkenburg, W. (2005). Global experience curves for wind farms. Energy Policy, 33, 133–150.Google Scholar
  60. Kalkuhl, M., Edenhofer, O., & Lessmann, K. (2012). Learning or lock-in: Optimal technology policies to support mitigation. Resource and Energy Economics, 34, 1–23.Google Scholar
  61. Kalkuhl, M., Edenhofer, O., & Lessmann, K. (2013). Renewable energy subsidies: Second-best policy or fatal aberration for mitigation? Resource and Energy Economics, 35, 217–234.Google Scholar
  62. Kerr, R. A. (2010). Do we have the energy for the next transition? Science, 329, 780–781.Google Scholar
  63. Knopf, B., & Geden, O. (2014). A warning from the IPCC: The EU 2030’s climate target cannot be based on science alone, Energypost.Google Scholar
  64. Knopf, B., Chen, Y.-H. H., De Cian, E., Förster, H., Kanudia, A., Karkatsouli, I., Keppo, I., Koljonen, T., Schumacher, K., & van Vuuren, D. (2013). Beyond 2020 – Strategies and costs for transforming the European energy system. Climate Change Economics, 4, 1340001.Google Scholar
  65. Knopf, B., Nahmmacher, P., & Schmid, E. (2015). The European renewable energy target for 2030 – An impact assessment of the electricity sector. Energy Policy, 85, 50–60.Google Scholar
  66. Kretschmer, B., Narita, D., & Peterson, S. (2009). The economic effects of the EU biofuel target. Energy Economics, 31, S285–S294.Google Scholar
  67. Kverndokk, S., & Rosendahl, K. E. (2007). Climate policies and learning by doing: Impacts and timing of technology subsidies. Resource and Energy Economics, 29, 58–82.Google Scholar
  68. Lehmann, P. (2012). Justifying a policy mix for pollution control: A review of economic literature. Journal of Economic Surveys, 26, 71–97.Google Scholar
  69. Lehmann, P. (2013). Supplementing an emissions tax by a feed-in tariff for renewable electricity to address learning spillovers. Energy Policy, 61, 635–641.Google Scholar
  70. Lehmann, P., & Gawel, E. (2013). Why should support schemes for renewable electricity complement the EU emissions trading scheme? Energy Policy, 52, 597–607.Google Scholar
  71. Lehmann, P., & Söderholm, P. (2018). Can technology-specific deployment policies be cost-effective? The case of renewable energy support schemes. Environmental and Resource Economics, 71, 475–505.Google Scholar
  72. Lehmann, P., Creutzig, F., Ehlers, M.-H., Friedrichsen, N., Heuson, C., Hirth, L., & Pietzcker, R. (2012). Carbon lock-out: Advancing renewable energy policy in Europe. Energies, 5, 323–354.Google Scholar
  73. Lehmann, P., Strunz, S., Gawel, E., & Korte, K. (2014). EU-Energiepolitik nach dem Jahr 2020 – Vorteile eines Ziel- und Instrumentenmixes. Gaia, 23, 60–61.Google Scholar
  74. Lehmann, P., Sijm, J., Gawel, E., Strunz, S., Chewpreecha, U., Mercure, J.-F., & Pollitt, H. (2019). Addressing multiple externalities from electricity generation: A case for EU renewable energy policy beyond 2020? Environmental Economics and Policy Studies. Scholar
  75. Lehr, U., Nitsch, J., Kratzat, M., Lutz, C., & Edler, D. (2008). Renewable energy and employment in Germany. Energy Policy, 36, 108–117.Google Scholar
  76. Lester, R. K., & McCabe, M. J. (1993). The effect of industrial structure on learning by doing in nuclear power plant operation. RAND Journal of Economics, 115, 418–438.Google Scholar
  77. Markussen, P., & Svendsen, G. T. (2005). Industry lobbying and the political economy of GHG trade in the European union. Energy Policy, 33, 245–255.Google Scholar
  78. Matthes, F. C. (2010). Greenhouse gas emissions trading and complementary policies. Developing a smart mix for ambitious climate policies. Berlin: Öko-Institut e.V.Google Scholar
  79. McCollum, D. L., Krey, V., & Riahi, K. (2011). An integrated approach to energy sustainability. Nature Climate Change, 1, 428–429.Google Scholar
  80. Möst, D., & Fichtner, W. (2010). Renewable energy sources in European energy supply and interactions with emission trading. Energy Policy, 38, 2998–2910.Google Scholar
  81. Neij, L. (1999). Cost dynamics of wind power. Energy, 24, 375–389.Google Scholar
  82. Neuhoff, K. (2005). Large-scale deployment of renewables for electricity generation. Oxford Review of Economic Policy, 21, 88–110.Google Scholar
  83. Noailly, J., & Shestalova, V. (2013). Knowledge spillovers from renewable energy technologies: Lessons from patent citations. CPB Discussion Paper. CPB Netherlands Bureau for Economic Policy Analysis, The Hague.Google Scholar
  84. O’Sullivan, M., Edler, D., & Lehr, U. (2016). Bruttobeschäftigung durch erneuerbare Energien in Deutschland und verringerte fossile Brennstoffimporte durch erneuerbare Energien und Energieeffizienz. Stuttgart: German Aerospace Center (DLR).Google Scholar
  85. Oates, W. E., & Portney, P. R. (2003). The political economy of environmental policy. In K.-G. Mäler & J. R. Vincent (Eds.), Handbook of environmental economics (pp. 325–354). Amsterdam: Elsevier.Google Scholar
  86. OECD. (2011). Inventory of estimated budgetary support and tax expenditures for fossil fuels. Paris: Organisation for Economic Cooperation and Development (OECD).Google Scholar
  87. Olson, M. (1965). The logic of collective action. Cambridge, MA: Harvard University Press.Google Scholar
  88. Palmer, K., & Burtraw, D. (2005). Cost-effectiveness of renewable electricity policies. Energy Economics, 27, 873–894.Google Scholar
  89. Pepermans, G., Driesen, J., Haeseldonckx, D., Belmans, R., & D’haeseleer, W. (2005). Distributed generation: Definition, benefits and issues. Energy Policy, 33, 787–798.Google Scholar
  90. Pethig, R., & Wittlich, C. (2009). Interaction of carbon reduction and green energy promotion in a small fossil-fuel importing economy. CESIfo Working Paper, Munich.Google Scholar
  91. Popp, D., & Newell, R. G. (2012). Where does energy R&D come from? Examining crowding out from energy R&D. Energy Economics, 34, 980–991.Google Scholar
  92. Rivers, N. (2013). Renewable energy and unemployment: A general equilibrium analysis. Resource and Energy Economics, 35, 467–485.Google Scholar
  93. Rudolph, S. (2009). How the German patient followed the doctor’s orders: Political economy lessons from implementing market-based instruments in Germany. In L.-H. Lye, J. E. Milne, H. Ashiabor, L. Kreiser, & K. Deketelaere (Eds.), Critical issues in environmental taxation – International and comparative perspectives (Vol. VII, pp. 587–606). Oxford: Oxford University Press.Google Scholar
  94. Siler-Evans, K., Azevedo, I. L., Morgan, M. G., & Apt, J. (2013). Regional variations in the health, environmental, and climate benefits of wind and solar generation. Proceedings of the National Academy of Sciences, 110, 11768–11773.Google Scholar
  95. Skodvin, T., Gullberg, A., & Aakre, S. (2010). Target-group influence and political feasibility: The case of climate policy design in Europe. Journal of European Public Policy, 17, 854–873.Google Scholar
  96. Smith, A., et al. (2019). EU climate and energy policy beyond 2020: Is a single target for GHG reduction sufficient? In E. Gawel, S. Strunz, P. Lehmann, & A. Purkus (Eds.), The European dimension of Germany’s energy transition – Opportunities and conflicts. Cham: Springer.Google Scholar
  97. Tol, R. S. J. (2012). A cost-benefit analysis of the EU 20/20/2020 package. Energy Policy, 49, 288–295.Google Scholar
  98. Trend Research/Leuphana. (2013). Definition und Marktanalyse von Bürgerenergie in Deutschland. Bremen/Lüneburg: Trend Research/Leuphana University.Google Scholar
  99. Ulph, A., & Ulph, D. (2013). Optimal climate change policies when governments cannot commit. Environmental and Resource Economics, 56, 161–176.Google Scholar
  100. Unruh, G. C. (2000). Understanding carbon lock-in. Energy Policy, 28, 817–830.Google Scholar
  101. Unteutsch, M., & Lindenberger, D. (2014). Promotion of electricity from renewable energy in Europe post 2020—The economic benefits of cooperation. Zeitschrift für Energiewirtschaft, 38, 47–64.Google Scholar
  102. van Benthem, A., Gillingham, K., & Sweeney, J. L. (2008). Learning-by-doing and the optimal solar policy in California. The Energy Journal, 29, 131–152.Google Scholar
  103. Wei, M., Patadia, S., & Kammen, D. M. (2010). Putting renewables and energy efficiency to work: How many jobs can the clean energy industry generate in the US? Energy Policy, 38, 919–931.Google Scholar
  104. Zerrahn, A. (2017). Wind power and externalities. Ecological Economics.
  105. Zimmerman, M. B. (1982). Learning effects and the commercialization of new energy technologies: The case of nuclear power. The Bell Journal of Economics, 13, 297–310.Google Scholar

Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  1. 1.Department of EconomicsHelmholtz Centre for Environmental Research – UFZLeipzigGermany
  2. 2.Institute for Infrastructure and Resources Management, Leipzig UniversityLeipzigGermany

Personalised recommendations