Environmental Engineering Reference
In-Depth Information
and (iii) the Directive on the promotion of cogeneration based on a useful heat
demand (2004/2008 CHP Directive).
All these policy initiatives do not, however, take place with a medium and long
term planning even though we have argued that this should be the way to proceed.
Policy makers should try to decide what are the measures and the periods of time
needed to achieve energy ef
ciency at minimum costs.
As regards the emissions reduction target, the primary tool continues to be the
ETS but some changes in the cap will be needed for the above policy instruments to
progress. Europe has not forgotten the carbon tax although there are still questions
about whether a single carbon tax would be capable of helping to move forward in
the ful
llment of the objectives. In this respect, the positions in the theoretical
literature diverge.
There are more examples that illustrate the dif
culties for achieving good reg-
ulation in the energy sector concerning the improvement of the environment. In
2001, the Renewable Energy Target (RET) was approved as a means to mitigate the
change in climate. This policy measure has survived since then, although the EU is
now considering scraping the use of binding renewable energy targets as part of its
global climate change policy mix. It now appears that the European Commission
may drop speci
c binding constraints on the share of electricity generated from
renewables [
27
]. Stavins argues that this potential decision by the European
Commission will be good news, not only for the economy but also for the envi-
ronment. His reasoning relies on the fact that in the presence of the EU ETS, the
“
complementary
”
renewable mandate enters into con
ict with other policies. He
believes that
without the renewables mandate, the cap being planned for the EU
ETS will be achieved at lower cost and will foster greater incentives for climate-
friendly technological change
“
”
.
Stavins
'
arguments rely on the perverse interactions between the three targets
(20-20-20)
ed on the following
grounds. As we know, economic theory shows that quantity restrictions as well as
taxes, if they are well calculated, can achieve the proposed targets at minimum
costs. Hence, the EU-ETS, with a binding cap, will provide the necessary incentives
for minimum abatement costs. If regulators introduce another additional measure,
two possibilities arise. The additional measure may be either irrelevant or it may
generate inef
related policies. These interactions are justi
ciencies. For example, it may generate excessive abatement in the
electricity sector in relation to what it would be cost-effective.
Furthermore, technological change may be retarded if the price of the permits in
the market is reduced, something that can be considered as a real possibility.
The relation between the energy sector and Climate Change is one of the reasons
that explain why regulation and policies to internalize this type of external effects
have been so closely analyzed. After all, Climate Change Policy is a priority for the
governments of many countries.
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