Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322290 
Year of Publication: 
2025
Series/Report no.: 
Oldenburg Discussion Papers in Economics No. V-453-25
Publisher: 
University of Oldenburg, Department of Economics, Oldenburg
Abstract: 
Deep decarbonization requires electrification of energy-related processes across all sectors of the economy. This so-called sector coupling has important implications for quantity-based regulations in the electricity sector which overlap with measures that promote electricity-based technologies in other sectors, like subsidies for electric vehicles, CO2 taxes on fossil technologies, or a separate ETS in the transport and buildings sectors. We show this for emissions trading systems (ETS) and renewable portfolio standards (RPS). The switch to electricity-based technologies usually strengthens an existing RPS. For the EU ETS, the switch raises demand for emission allowances in countries with such additional policies, but emission reductions come from all countries within the ETS. There is thus a reverse waterbed effect. Numerical simulations for overlapping regulations in the EU and the US underpin the policy relevance. They suggest that overlapping policies should generally target sectors not covered by quantity instruments such as an ETS or RPS.
Subjects: 
Sector coupling
overlapping regulation
cap and trade
renewable portfolio standards
unilateral action
reverse waterbed effect
JEL: 
H23
D58
Q54
Q38
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.