Combining climate and energy policies:
synergies or antagonism?
Model interactions with energy efficiency instruments
Oskar Lecuyer and Ruben Bibas
Paper discussion
Background Framework:
Europe 2020
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Reduction of Green House Gas emissions to 20% below
levels of 1990
20% of energy consumption from renewable sources
20% of reduction in energy consumption to be achieved
from energy efficiency
Climate and Energy package enforced June 2009
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
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Revision of Emissions Trading Scheme (ETS)
‘Effort sharing effort’ governing emissions issues not
covered by the ETS
Binding national targets for renwable energy
production to reach 20% by 2020
Legal framework to promote development of carbon
capture and storage
This paper poses the question:
What is the affect of the implimentation of various policy
instruments at the same time?
Study aims:

To investigate the relationship between various
instruments

And the channels through which they become effective
Thus the paper seeks to present a framework and
analysis of interactions from:

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the combination of several price instruments
the behaviour of the instruments following the addition
of energy consumption reduction quota variable
Types of interactions:
Internal – between two or more climate policy
instruments
External – between a climate and a non-climate policy
instrument
Horizontal – same level of governance e.g. EU level
Vertical – different levels of governance e.g. and EU policy
and a national policy
The paper focuses on the system involving the investment
in energy efficiency and thus the demand for a decrease in
energy consumption.
The authors then create a model where they include
several price instruments at different stage and the energy
demand is decreased by a quota.
Synergies and Antagonisms
In the framework as presented in the study following the
introduction of price instruments, similar signs indicate a
sinergie between policies whereas differentiating signs
indicate an antagonism.
According to the model in this study, the subsidies for
renwable energy (R) and energy savings (E) are
antagonistic for renewable energy production and energy
savings
Following the addition of a consumption reduction quota,
Renewable subsidies and energy saving quotas are
antagonists to energy savign promotion and renewable
production
Whereas renewable subsidies, energy savings quota and
carbon tax for fossil fuel (F) production are antagonists
with respect to the level of certificate price. (Renewable
Energy Certificates, REC).
Results:
All instruments considered aim to reduce emissions by
the reduction of fossil energy production
Price for energy will be increased with an increase in
carbon tax, and decreased through energy efficiency and
renewable energy subsidies (if public finance is not
considered and no charge put on end-users).
The interaction between emissions permit price and the
two subsidies is negative and at equilibrium, both subsidies
reduce emissions permits price
Regarding Climate and Energy Package, the model shows
that:
A carbon tax causes a reduction in the energy production
from fossils, the increase in development of renewable
energy systems and a reduction in energy consumption
through energy efficiency.
This instrument however can only determine one good
(fossil) and not all the goods together when objectives for
renewables and energy savings are set, meaning that when
a specific quota is set for one of the latter goods, the
instrument is not efficient in determing the price for all
goods together
For renewables and energy savings to be within targets,
specific instruments have to be introduced but this model
has shown that when they are implemented together, they
impede eachother from reaching the full potential of the
respective instrument.
Thus the ‘promotion of renewables comes at the expense
of energy savings promotion and vice versa’.
The model also suggests that the introduction of a
consumption reduction quota has some effects on
demand. Reducing net demand will decrease the expense
on fossil fuel (and emissions) thus reducing market price.
In conclusion
 This models enables policy makers to better understand
interactions between climate policy instruments

All instruments are effective sepertely but when done
in conjunction may not have the desired affect thus
requiring additional instruments capable of achieving
results for all energy types

The paper suggest an integrated approach is required
for climate and energy policy where all individual
instruments are tuned in line with all other instruments
possibly including the price reduction objective as
another important issue.
Questions:

When considering the current financial situation within
the EU, particularly the Eurozone, is it envisaged that
the 2020 goals are still achievable?

Would an Emissions Trading Scheme provide a level
playing field for states considering that wealthier states
might have the possibility of aquiring access credits over
other states?