When is a carbon price floor desirable?
| dc.contributor.author | Newbery, D. | |
| dc.contributor.author | Reiner, D. | |
| dc.contributor.author | Ritz, Robert | |
| dc.date.accessioned | 2018-06-22T11:12:39Z | |
| dc.date.available | 2018-06-22T11:12:39Z | |
| dc.date.issued | 2018-06-15 | |
| dc.description.abstract | The EU carbon price lies well below estimates of the social cost of carbon and “target-consistent” carbon prices needed to deliver ambitious targets such as the 40% reduction target for 2030. In light of this, the UK introduced a carbon price floor (CPF) for its electricity sector in 2013 and the new Dutch Government has recently made a similar commitment, while successive French Governments have called for an EU-wide CPF. This paper analyzes the impacts and design of a power-sector CPF, both at the EU and national level, using a political-economy approach. We find a good case for introducing such a price-based instrument into the EU ETS. We suggest that a CPF should be designed to “top up” the EUA price to €25–30/tCO2, rising annually at 3–5% above inflation, at least until 2030. We argue that the new EU Market Stability Reserve enhances the value of a CPF in terms of delivering climate benefits, and discuss the potential for a regional CPF in North-West Europe. We also review international experience with price floors (and ceilings). | |
| dc.identifier.doi | 10.17863/CAM.24678 | |
| dc.identifier.other | CWPE1833 | |
| dc.identifier.uri | https://www.repository.cam.ac.uk/handle/1810/277385 | |
| dc.language.iso | eng | |
| dc.publisher | Faculty of Economics | |
| dc.relation.ispartofseries | Cambridge Working Papers in Economics | |
| dc.rights | All Rights Reserved | |
| dc.rights.uri | https://www.rioxx.net/licenses/all-rights-reserved/ | |
| dc.subject | Carbon pricing | |
| dc.subject | electricity markets | |
| dc.subject | market failure | |
| dc.subject | policy failure | |
| dc.subject | political economy | |
| dc.subject | price floor | |
| dc.title | When is a carbon price floor desirable? | |
| dc.type | Working Paper | |
| rioxxterms.version | AO |