Decarbonising the European Union credibly, effectively and acceptably
This policy brief (8pp) summarises the main findings from the Statkraft research programme, ‘“Fit-for-purpose” energy and climate change mitigation policies for the European Union’, completed in December 2017.
The brief is a condensed version of the full final project report (34pp), Credible, effective and publicly acceptable policies to decarbonise the European Union: Final report (Bassi S, Carvalho M, Doda B and Fankhauser S, 2017)
- Carbon pricing reduces power sector emissions cost-effectively, and is distributionally more equitable for producers than its alternatives.
- Credibility of efforts to decarbonise electricity varies across EU member states and needs to be improved, including through better and more coherent policies.
- Public opposition to carbon pricing through taxes on non-EU emissions trading system sectors can be avoided if tailored design and communication are employed.
Key messages and recommendations
EU member states should prioritise carbon pricing to decarbonise the power sector as it enters a new phase of more mature renewables. Carbon pricing (embedded in the EU emissions trading system) achieves emission reductions more equitably and at the lowest welfare cost compared with coal taxes, electricity taxes, and subsidies.
In order to improve the credibility of their efforts to decarbonise the power sector, EU member states need to act in particular on: creating clear policy and legislation, improving joined-up thinking and scrutiny of decision-making bodies, limiting reversals of policy, and generating buy-in from the private sector and the public.
Carbon pricing through taxes can be very effective in some sectors not covered by the EU emissions trading system. Introducing or strengthening carbon taxes is challenging, but taxes can be made more acceptable through improved design and communication, including gradual phase-in and earmarking or redistribution mechanisms.
This brief draws on the findings of three research papers, carried out as part of the Statkraft research programme. They are:
- The credibility of the European Union’s efforts to decarbonise the power sector (Bassi S, Averchenkova A and Carvalho M, 2017)
- Energy policy and the power sector in the long run (Doda B and Fankhauser S, 2017)
- How to make carbon taxes more acceptable (Carattini S, Carvalho M and Fankhauser F, 2017)