Electricity generation based on renewable energy (RE) sources such as wind and solar replace the most expensive generators that often rely on fossil fuels. In response to RE promotion, wholesale electricity prices and carbon emissions are therefore expected to decrease. In interconnected...

This paper examines how optimal renewable energy (RE) support (RES) policies need to be adjusted to account for carbon prices. We show theoretically and empirically that changing carbon prices requires adjusting RE production subsidies due to two different motives: First, RE premiums need to be...

It is widely believed that an environmental tax (price regulation) and cap-and-trade (quantity regulation) are equally efficient in controlling pollution when there is no uncertainty. We show that this is not the case if some consumers (firms, local governments) are morally concerned about...

International carbon markets are frequently propagated as an efficient instrument for reducing CO2 emissions. We argue that such markets, despite their desirable efficiency properties, might not be in the best interest of governments who are guided by strategic considerations in negotiations. We...

Climate protection should use environmental policy instruments that raise revenues, which can be used, for instance, to cut labour taxes to alleviate unemployment in economies suffering from high and persistent unemployment. This paper elaborates the possibilities of an employment dividend of...