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  EU carbon prices signal high policy credibility and farsighted actors

Sitarz, J., Pahle, M., Osorio, S., Luderer, G., Pietzcker, R. C. (2024 online): EU carbon prices signal high policy credibility and farsighted actors. - Nature Energy.
https://doi.org/10.1038/s41560-024-01505-x

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Item Permalink: https://publications.pik-potsdam.de/pubman/item/item_29958 Version Permalink: https://publications.pik-potsdam.de/pubman/item/item_29958_1
Genre: Journal Article

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 Creators:
Sitarz, Joanna1, Author              
Pahle, Michael1, Author              
Osorio, Sebastian1, Author              
Luderer, Gunnar1, Author              
Pietzcker, Robert C.1, Author              
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1Potsdam Institute for Climate Impact Research, ou_persistent13              

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 Abstract: Carbon prices in the EU emissions trading system are a key instrument driving Europe’s decarbonization. Between 2017 and 2021, they surged tenfold, exceeding €80 tCO2−1 and reshaping investment decisions across the electricity and industry sectors. What has driven this increase is an open question. While it coincided with two significant reforms tightening the cap (‘MSR reform’ and ‘Fit for 55’), we argue that a reduced supply of allowances alone cannot fully explain the price rise. A further crucial aspect is that actors must have become more farsighted as the reform signalled policymakers’ credible long-term commitment to climate targets. This is consistent with model results that show historic prices can be better explained with myopic actors, whereas explaining prices after the reforms requires actors to be farsighted. To underline the role of credibility, we test what would happen if a crisis undermines policy credibility such that actors become myopic again, demonstrating that carbon prices could plummet and endanger the energy transition.

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Language(s): eng - English
 Dates: 2023-03-312024-03-132024-05-30
 Publication Status: Published online
 Pages: 22
 Publishing info: -
 Table of Contents: -
 Rev. Type: Peer
 Identifiers: DOI: 10.1038/s41560-024-01505-x
Organisational keyword: RD3 - Transformation Pathways
PIKDOMAIN: RD3 - Transformation Pathways
MDB-ID: No data to archive
Working Group: Energy Systems
Working Group: Climate & Energy Policy
OATYPE: Hybrid - Nature OA
Model / method: Quantitative Methods
Regional keyword: Europe
Research topic keyword: Mitigation
Research topic keyword: Energy
Research topic keyword: Climate Policy
 Degree: -

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Project name : ARIADNE
Grant ID : 3SFK5A
Funding program : -
Funding organization : Bundesministerium für Bildung und Forschung (BMBF)
Project name : CAPABLE
Grant ID : 101056891
Funding program : Horizon Europe (HE)
Funding organization : European Commission (EC)
Project name : ECEMF
Grant ID : 101022622
Funding program : Horizon 2020 (H2020)
Funding organization : European Commission (EC)
Project name : CAMPAIGNERS
Grant ID : 101003815
Funding program : Horizon 2020 (H2020)
Funding organization : European Commission (EC)

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Title: Nature Energy
Source Genre: Journal, SCI, Scopus
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Pages: - Volume / Issue: - Sequence Number: - Start / End Page: - Identifier: CoNE: https://publications.pik-potsdam.de/cone/journals/resource/nature-energy
Publisher: Nature