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  Safeguarding the energy transition against political backlash to carbon markets

Pahle, M., Tietjen, O., Osorio, S., Egli, F., Steffen, B., Schmidt, T. S., Edenhofer, O. (2022): Safeguarding the energy transition against political backlash to carbon markets. - Nature Energy, 7, 3, 290-296.
https://doi.org/10.1038/s41560-022-00984-0

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 Creators:
Pahle, Michael1, Author              
Tietjen, Oliver1, Author              
Osorio, Sebastian1, Author              
Egli, Florian2, Author
Steffen, Bjarne2, Author
Schmidt, Tobias S.2, Author
Edenhofer, Ottmar1, Author              
Affiliations:
1Potsdam Institute for Climate Impact Research, ou_persistent13              
2External Organizations, ou_persistent22              

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Free keywords: Economics, Finance, Politics and international relations
 Abstract: Substantial renewable energy (RE) cost reductions have raised the prospect of a subsidy-free RE era of the energy transition. The envisaged policy cornerstones of this era are carbon markets, which create economic incentives for sustaining further RE deployment. However, this overlooks that exposing RE to market risks and increasing interest rates would result in substantially higher financing cost, which in turn would lead to much steeper carbon price paths. The resulting political pressure may provoke a price-depressing regulatory intervention, disrupting further RE expansion. Here we conceptualize this feedback and infer indicators for the risk of such an intervention. By quantifying these indicators for the European Union, we find that increased financing cost could double carbon prices in the long term, halve the rate of renewable capacity deployment in the next 15 years and considerably increase the profits of fossil fuel plants. This implies a substantial risk of pushback that policymakers should safeguard against.

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Language(s): eng - English
 Dates: 2021-03-052022-01-202022-03-032022-03
 Publication Status: Finally published
 Pages: 7
 Publishing info: -
 Table of Contents: -
 Rev. Type: Peer
 Identifiers: MDB-ID: yes - 3299
Organisational keyword: Director Edenhofer
PIKDOMAIN: Director / Executive Staff / Science & Society
Organisational keyword: RD3 - Transformation Pathways
PIKDOMAIN: RD3 - Transformation Pathways
DOI: 10.1038/s41560-022-00984-0
Research topic keyword: Economics
Research topic keyword: Policy Advice
Research topic keyword: Climate Policy
OATYPE: Green Open Access
 Degree: -

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Title: Nature Energy
Source Genre: Journal, SCI, Scopus
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Publ. Info: -
Pages: - Volume / Issue: 7 (3) Sequence Number: - Start / End Page: 290 - 296 Identifier: Publisher: Nature
Other: 2058-7546
CoNE: https://publications.pik-potsdam.de/cone/journals/resource/nature-energy