With the Green New Deal, the European Union has increased its climate policy ambitions and aims to become climate neutral by 2050. This goal also affects German climate policy and energy supply in the coming decades.
A key climate policy instrument is European emissions trading (EU ETS). It currently covers energy-intensive industry, power generation, and intra-European air traffic. Stricter reduction targets thus have a direct impact on these sectors.
For the other sectors, such as transport and buildings, the reduction targets are currently set for each member state via European effort sharing. The critical issue is how the more ambitious targets can be implemented employing effort sharing. In addition, an extension of emissions trading to sectors not currently covered is conceivable in the medium to long term. Finally, the question arises as to how European climate policy can function in an international context and what additional instruments are required to prevent carbon leakage, i.e., the shifting of emissions to other countries without affecting global climate protection. One such instrument could be a border adjustment mechanism, for example.
The EWI deals with the economic and regulatory aspects of European climate policy. For this purpose, for example, a fundamental model of the European emissions trading system was developed, with which the effects of the (newly introduced) market stability reserve or the tightening of climate targets on the certificate price in emissions trading were analyzed.
In addition to emissions trading, the EWI also deals with other European climate and energy policy instruments, such as border adjustment mechanisms or technology promotion. Furthermore, the EWI analyzes the effects of CO2 pricing mechanisms in sectors not covered by the EU ETS, in particular transport and buildings.
The EWI quantifies the effects of European climate policy in the European energy supply system. The EWI’s model DIMENSION can analyze different price developments in European emissions trading or the reduction of greenhouse gas emissions in the end-use sectors. Based on the quantitative analyses, implications and recommendations for practice and policy can be derived.