Renewable energy policy and climate policy interactions

This paper explores the relationships between climate policy and renewable energy policy instruments. It shows that, even when CO2 emissions are appropriately priced, specific incentives for supporting the early deployment of renewable energy technologies are justified by the steep learning curves of nascent technologies. This early investment reduces costs in the longer term and makes renewable energy affordable when it needs to be deployed on a very large scale to fully contribute to climate-change mitigation and energy security. The paper also reveals that both CO2 prices and the measures to deploy renewable electricity create wealth transfers between electric utilities and their customers, although in opposite directions. This may be important when considering the political economy of the interactions between CO2 pricing and renewable energy support in the future.

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