Overlapping carbon pricing and renewable support schemes under political uncertainty: Global lessons from an Australian case study
The translation of a greenhouse gas (GHG) emissions reduction policy objective to the required investment in low emissions technologies may be hindered by political contest over the policy instruments employed to achieve it. Political contest may also result in enactment of overlapping policy instru...
| Main Authors: | , , , |
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| Format: | Journal Article |
| Published: |
Elsevier
2017
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| Online Access: | http://hdl.handle.net/20.500.11937/53992 |
| _version_ | 1848759277263519744 |
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| author | Shahnazari, M. McHugh, A. Maybee, Bryan Whale, J. |
| author_facet | Shahnazari, M. McHugh, A. Maybee, Bryan Whale, J. |
| author_sort | Shahnazari, M. |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | The translation of a greenhouse gas (GHG) emissions reduction policy objective to the required investment in low emissions technologies may be hindered by political contest over the policy instruments employed to achieve it. Political contest may also result in enactment of overlapping policy instruments which, from a ‘policy purist’ perspective, may not appear well calibrated to a shared GHG emissions reduction objective. This paper reports insights gained from an integrated real options and portfolio optimisation model of electricity generation investment behaviour under political uncertainty over the futures of interacting carbon pricing and renewable portfolio standard (RPS) instruments. We compare modelling results and actual outcomes in Australia, where an emission reduction target has had bipartisan support but the means to achieve it has not, to test the assertion that overlapping policy instruments must always increase the social costs of GHG abatement. Results suggest that overlapping a politically contested carbon pricing policy with an RPS may result in a lower risk, renewable energy (RE) investment environment, as the overlap allows investors to hedge their portfolio against political uncertainty through RE additions. Consequently, GHG abatement objectives may be achieved at lower cost than would be the case without the policy interaction. The policies overlap can provide a ‘safety valve’ or ‘hedge’ to both private investors and policymakers when deep uncertainties over the future of energy and climate policies influence investment strategies. |
| first_indexed | 2025-11-14T09:57:19Z |
| format | Journal Article |
| id | curtin-20.500.11937-53992 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T09:57:19Z |
| publishDate | 2017 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-539922017-10-06T03:21:08Z Overlapping carbon pricing and renewable support schemes under political uncertainty: Global lessons from an Australian case study Shahnazari, M. McHugh, A. Maybee, Bryan Whale, J. The translation of a greenhouse gas (GHG) emissions reduction policy objective to the required investment in low emissions technologies may be hindered by political contest over the policy instruments employed to achieve it. Political contest may also result in enactment of overlapping policy instruments which, from a ‘policy purist’ perspective, may not appear well calibrated to a shared GHG emissions reduction objective. This paper reports insights gained from an integrated real options and portfolio optimisation model of electricity generation investment behaviour under political uncertainty over the futures of interacting carbon pricing and renewable portfolio standard (RPS) instruments. We compare modelling results and actual outcomes in Australia, where an emission reduction target has had bipartisan support but the means to achieve it has not, to test the assertion that overlapping policy instruments must always increase the social costs of GHG abatement. Results suggest that overlapping a politically contested carbon pricing policy with an RPS may result in a lower risk, renewable energy (RE) investment environment, as the overlap allows investors to hedge their portfolio against political uncertainty through RE additions. Consequently, GHG abatement objectives may be achieved at lower cost than would be the case without the policy interaction. The policies overlap can provide a ‘safety valve’ or ‘hedge’ to both private investors and policymakers when deep uncertainties over the future of energy and climate policies influence investment strategies. 2017 Journal Article http://hdl.handle.net/20.500.11937/53992 10.1016/j.apenergy.2017.05.038 Elsevier restricted |
| spellingShingle | Shahnazari, M. McHugh, A. Maybee, Bryan Whale, J. Overlapping carbon pricing and renewable support schemes under political uncertainty: Global lessons from an Australian case study |
| title | Overlapping carbon pricing and renewable support schemes under political uncertainty: Global lessons from an Australian case study |
| title_full | Overlapping carbon pricing and renewable support schemes under political uncertainty: Global lessons from an Australian case study |
| title_fullStr | Overlapping carbon pricing and renewable support schemes under political uncertainty: Global lessons from an Australian case study |
| title_full_unstemmed | Overlapping carbon pricing and renewable support schemes under political uncertainty: Global lessons from an Australian case study |
| title_short | Overlapping carbon pricing and renewable support schemes under political uncertainty: Global lessons from an Australian case study |
| title_sort | overlapping carbon pricing and renewable support schemes under political uncertainty: global lessons from an australian case study |
| url | http://hdl.handle.net/20.500.11937/53992 |