‘Carbon pricing better option than clean subsidies’

The EU should focus on carbon pricing instead of renewable subsidies to decarbonise the power sector. That’s the conclusion reached in a new study from the Grantham Research Institute on […]

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By Jonny Bairstow

The EU should focus on carbon pricing instead of renewable subsidies to decarbonise the power sector.

That’s the conclusion reached in a new study from the Grantham Research Institute on Climate Change and the ESRC Centre for Climate Change Economics and Policy at the London School of Economics and Political Science.

It points out renewable power sources like wind and solar are becoming increasingly competitive with fossil fuels and will soon no longer need to be subsidised.

The report suggests carbon pricing is a more cost-effective way of cutting emissions through using more mature sources of clean energy.

Researchers add carbon pricing means all low carbon producers are treated equally, resulting in a “more even distribution of policy costs and benefits among generators”.

A new model created to analyse the best path forward found carbon pricing is more cost-effective than taxing coal and electricity consumption and implementing a technology-specific subsidy.

In an analysis of eight EU nations, Denmark, Germany and the UK were ranked as having the most credible decarbonisation plans for the power sector.

France, Spain and Italy ranked in the middle and Poland and the Czech Republic were found to have the most unrealistic plan to go clean.

To overcome possible public opposition to carbon taxes, the report suggests phasing them in slowly, introducing them at a low rate and using trial periods.

It adds although the EU is on track to meet its 2020 targets of cutting emissions by 20% compared with 1990 levels and generating a fifth of power from renewable sources, Member States will need stronger policies to meet the 2030 target of a 40% cut in annual emissions.