Interactions Between Climate Policies in the Power Sector - Green Energy and Efficiency: An Economic Perspective - page 283

such as coal, in the production of electricity. So, paradoxically, it may turn out that
RES-E support programmes end up promoting the dirtiest technologies.
Fourth, subsidies or other support schemes to renewables aiming to correct
carbon market

aws should be set according to marginal damages. R&D subsidies

should re ect the spillover rate and RES-E production should be subsidised in

proportion to the spillovers resulting from learning-by-doing. However, in practice
this is not always feasible and the promotion of speci c technologies is linked to the

cost difference with the marginal competitive technology. This may bring incon-
sistencies that should be carefully addressed.
Fifth, the climate policy mix should be carefully designed to take into account
potential interactions between policy instruments. RES-E support mechanisms
should address the market failure they aim to solve, be it carbon market imper-
fections or non-appropriable technology externalities. The impact of RES-E support
mechanisms on carbon prices should be included in their design to avoid unwanted
effects. The danger that a bad design increases the cost of carbon reduction and
fosters the use of dirtier technologies is real.

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