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Policy Sciences

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01-09-2014

On evaluating success in complex policy mixes: the case of renewable energy support schemes

Author: Pablo del Río

Published in: Policy Sciences | Issue 3/2014

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Abstract

The aim of this paper is to propose the main elements of a theoretical and methodological framework for the assessment of the success of complex policy mixes, to highlight the conflicts between individual instruments and other elements within those mixes and to propose policy recommendations in order to mitigate them. Some criteria are defined, and different levels of analysis are considered. The challenges in evaluating policy packages are illustrated with the case of the coexistence between renewable energy support and emissions trading schemes. It is shown that policy mixes inherently lead to interactions between the different instruments, either in the form of conflicts or synergies. Conflicts are horizontal (i.e., between different types of instruments) and/or vertical (i.e., between different administrative levels). It is suggested that mitigating those conflicts could require administrative coordination. Relevant coordination could take place between different administrative levels and relate to different instruments or different design elements within similar instruments. However, given the trade-offs between different criteria, the role of coordination is necessarily limited.

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This is a similar approach to Braathen (2007) who reviews the common practice of using multiple policy instruments for environmental purposes from household waste management to energy efficiency and derives some principles for determining appropriate environmental policy mixes.

I thank an anonymous referee for this remark.

These criteria are common in the declarations of the goals made by climate and energy regulations and instruments in Europe. An example is the recent European Climate and Energy Package. Konidari and Mavrakis (2007) and Oikonomou and Jepma (2008) provide a complete overview of the criteria used in the climate policy literature. Mitchell et al. (2011) discuss relevant criteria in the realm of RES-E support.

Notwithstanding, we are aware that stakeholders may behave strategically when selecting and interpreting criteria (Felder et al. 2011).

Other market failures may exist, including informational problems and market power. However, we have focused on the three which are most relevant to justify the coexistence of CO2 mitigation (ETS) and RES-E support policies.

Since the 1970s, the costs of energy production from all technologies have fallen systematically through innovation and economies of scale in manufacture and use (apart from nuclear power). Technologies such as solar energy and offshore wind all show much scope for further innovation and cost reductions (IEA 2008). The extent of those reductions depends on the maturity of the technology. The costs of the more mature technologies are assumed to fall less than those of new technologies (IEA 2009).

See, for example, EC (2012a).

In turn, this contribution depends on how the instruments and design elements are implemented. Policies that are easy to understand, transparent in terms of eligibility and compliance and stable in duration and statute (Sovacool 2010) are more likely to achieve those goals.

Obviously, given their qualitative differences, different technologies contribute differently to those goals and their contribution can be evaluated with the assessment criteria. Different renewable energy technologies may be promoted, leading to interactions (synergies, complementarities and conflicts) between them in attaining the targets/goals.

For example, simulations with the ADMIRE-REBUS model showed that an EU ETS combined with an EU-wide tradable green certificate system for the promotion of RES-E would be the least-cost system to deploy renewables in the EU, since the cheapest technologies and locations would be used first with this technology-neutral scheme (Uyterlinde et al. 2003). However, it was also shown that it would lead to some countries (such as Spain) being importers of certificates, which would be created by deploying RES-E elsewhere. These results were rejected by Spanish policy makers. They argued that they would better spend such money in deploying renewables in Spain and grasping the local benefits of so doing.

Recent legislation in both chambers of the US Congress has sought to create a similar “package” of federal policies to reduce emissions and stimulate renewable energy production. The House and Senate bills share the same goal: “to create clean energy jobs, achieve energy independence, reduce global warming pollution and the transition to a clean energy economy” (Fischer and Preonas 2010).

Several studies find that TGC quotas substantially increase the social costs of the EU ETS (Böhringer and Rosendahl 2010; Abrell and Weigt 2008; Unger and Ahlgren 2005).

However, the low CO2 prices in the EU ETS are not fundamentally related to RES-E deployment, but to lenient targets and the economic crisis (Ellerman 2013a).

See Abrell and Weigt (2008); Braathen (2011); Fisher and Preonas (2010); Böhringer and Rosendahl (2010); De Jonghe et al. (2009); Lecuyer and Bibas (2011); Tsao et al. (2011); Pethig and Wittlich (2009) and Palmer et al. (2011).

Using an ETS to reach a RES-E quota leads to higher consumer costs than using RES-E deployment instruments for that purpose, due to the strong emission restriction needed to increase RES-E deployment with an indirect mechanism such as an ETS (Jensen and Skytte 2003, Fischer and Newell 2008, Huber et al. 2004).

See also Sovacool (2010) and del Río et al. (2012).

Möst and Fichtner (2012) empirically show that the combination increases the costs to reach the CO2 target but that it fulfills other goals.

This does not rule out the need to make RES-E deployment policy as efficient as possible. In particular, we should assess the extent to which the non-CO2 goals and the deployment externality justify the additional costs of RES-E deployment. These benefits should be compared to the costs of RES-E promotion. A reasonable level of support for RES-E deployment would then be justified, but this is neither cero nor excessively generous.

RES-E is particularly challenging: It requires an assessment of the CO2 content of the kWh it displaces, which depends on the merit order (i.e. the last production capacity required to fulfill the demand at every moment). These elements typically differ from one country to another (Philibert 2011).

The CDM methodology for determining a baseline emission factor usually takes a weighted average of existing capacity (operating margin) and newly invested capacity in a country, thereby assuming that the weighted capacity in the baseline is a reflection of policy instruments implemented in the country. The instruments themselves are not directly included in the baseline methodology; they are more specifically addressed in the CDM additionality tool. I thank an anonymous reviewer for this remark.

For example, the rise in RES-E and the corresponding emission reductions were not anticipated in the German NAP (Rathmann 2007), although this seems to have changed later since, according to Matthes (2010), the expected CO2 reductions in Germany due to RES-E promotion were taken into account in reducing the cap accordingly.

A quantitative assessment of the interaction between the RES and GHG targets but also between CO2 prices and RES support level is provided in EC (2008). The scenarios show that a carbon price of 49 €/tCO2 is required to achieve the 20 % GHG reduction commitment if no RES policies are put in place. But if RES policies are introduced to achieve the RES target, a carbon price of 39 €/tCO2 would achieve the same GHG reduction target. A 20 % GHG target only would result in a RES penetration of 15.8 % in 2020 (far from the 20 % RES target). A 20 % RES target only would reduce GHG emissions by 9.3 %, i.e., also far from the 20 % GHG emissions reduction target.

See Jordan and Lenschow (2010) and Nilsson and Eckerberg (2007) for a review of the literature on environmental policy integration.

The failure to create an internal electricity market due to the rejection of some countries, in spite of the 1996 Directive on the internal energy market, seems to confirm this pessimistic expectation (see European Commission 2012b). The initial, failed attempts to fully harmonize RES-E support schemes in the EU by the European Commission (Resch et al. 2013) also confirm this statement.

According to Ashford and Hall (2011), integration requires (1) addressing multiple goals (e.g., economic development, employment, environment and public health) in the same piece of legislation or at least passing a group of complementary laws in parallel fashion, (2) planning regulatory and programmatic initiatives with participants from different governmental authorities and (3) deliberate simultaneous or staged implementation and monitoring involving different governmental authorities.

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Title: On evaluating success in complex policy mixes: the case of renewable energy support schemes
Author: Pablo del Río
Publication date: 01-09-2014
Publisher: Springer US
Published in: Policy Sciences / Issue 3/2014
Print ISSN: 0032-2687
Electronic ISSN: 1573-0891
DOI: https://doi.org/10.1007/s11077-013-9189-7

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