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Analysis of the EU policy package on climate change and renewables

Capros, Pantelis, Mantzos, Leonidas, Parousos, Leonidas, Tasios, Nikolaos, Klaassen, Ger, Van Ierland, Tom
Energy policy 2011 v.39 no.3 pp. 1476-1485
European Union, carbon dioxide, carbon markets, climate change, cost effectiveness, energy, greenhouse gas emissions, greenhouse gases, industry, issues and policy, models, power plants, renewable energy sources
In 2009 the EU decided to reduce greenhouse gas emissions at least by 20% in 2020 compared to 1990 and to supply 20% of energy needs by 2020 from renewable energy sources. This paper uses an energy model coupled with a non-CO₂ greenhouse gas model to assess the range of policy options that were debated to meet both targets. Policy options include trading of renewable targets, carbon trading in power plants and industry and the use of the Clean Development Mechanism to improve cost-efficiency. The models also examined fairness by analysing the distribution of emission reduction in the non-emission trading sector, the distribution of CO₂ allowances in the emission trading sector and the reallocation of renewable targets across Member States. The overall costs of meeting both targets range from 0.4% to 0.6% of GDP in 2020 for the EU as a whole. The redistribution mechanisms employed significantly improve fairness compared to a cost-effective solution.