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Diskussionspapiere 1859 / 2020
Carbon pricing decisions by governments are prone to time-inconsistency, which causes the private sector to underinvest in emission-reducing technologies. We show that incentives for decarbonization can be improved if complementing carbon pricing with carbon contracts for differences, where the government commits to pay a fixed carbon price level to the investors. We derive conditions under which the ...
2020| Olga Chiappinelli, Karsten Neuhoff
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Diskussionspapiere 1855 / 2020
As part of its Green Deal, the European Commission is considering the introduction of border carbon adjustments and alternative measures. The measures, which would primarily apply to basic materials like steel and cement, pursue a double objective: they are aimed at enhancing the effectiveness of carbon pricing for the transition to climate neutrality but also at avoiding carbon leakage risks. When ...
2020| Roland Ismer, Karsten Neuhoff, Alice Pirlot
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Diskussionspapiere 1834 / 2019
This paper explores whether governments can ban carbon-intensive materials through product carbon requirements. By setting near-zero emission limits for the production of materials to be sold within a jurisdiction, governments would accelerate the phase out of carbon-intensive production processes. Their announcement could alert basic materials producers, financing institutions, and other relevant ...
2019| Timo Gerres, Manuel Haussner, Karsten Neuhoff, Alice Pirlot
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Diskussionspapiere 1819 / 2019
CO2-Abgaben bergen die Gefahr, einkommensschwächere Haushalte überdurchschnittlich zu belasten. Zur Abwehr solcher regressiven Verteilungswirkungen wird erwogen, einen Teil der Einnahmen durch einen Pro-Kopf-Bonus an die Bürger*innen zurückzugeben. Der vorliegende Beitrag entwickelt einen Vorschlag für einen in das deutsche Krankenversicherungssystem integrierten Bonus. Dazu werden zunächst die Ziele ...
2019| Roland Ismer, Manuel Haußner, Klaus Meßerschmidt, Karsten Neuhoff
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Diskussionspapiere 1765 / 2018
Short-term electricity markets are key to an efficient production by generation units. We develop a two-period model to assess different bidding formats to determine for each bidding format the optimal bidding strategy of competitive generators facing price-uncertainty. We compare the results for simple bidding, block bidding and multi-part bidding and find that even under optimal simple and block ...
2018| Jörn C. Richstein, Casimir Lorenz, Karsten Neuhoff
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Diskussionspapiere 1746 / 2018
Cost of renewable energies have dropped, approaching wholesale power price levels. As a result, the role of renewable energy policy design is shifting – from covering incremental costs towards facilitating risk-hedging. An analytical model of the financing structure of renewable investment projects is developed to assess this effect und used to compare different policy design choices: contracts for ...
2018| Karsten Neuhoff, Nils May, Jörn C. Richstein
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Diskussionspapiere 1712 / 2017
Greenhouse gas emission benchmarks are widely implemented as a policy tool, as more countries move to implement carbon pricing mechanisms for industrial emissions. In particular, benchmarks are used to determine the level of free allowance allocation in emission trading schemes, which are distributed as a measure to prevent carbon leakage. This paper analyses how benchmark designs impact firms’ production ...
2017| Vera Zipperer, Misato Sato, Karsten Neuhoff
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Diskussionspapiere 1710 / 2017
In this paper we show that carbon pricing is subject to time-inconsistency and we investigate solutions to improve on the problem and restore the incentive for the private sector to invest in low-carbon innovation. We show that a superior price- investment equilibrium can be sustained in the long-term, if the policy-maker is enough forward looking and allowed to build reputation. In the short-term, ...
2017| Olga Chiappinelli, Karsten Neuhoff
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Diskussionspapiere 1684 / 2017
Power systems with increasing shares of wind and solar power generation have higher capital and lower operational costs than traditional technologies. This increases the importance of the cost of finance for total system cost. We quantify how renewable policy design can influence cost of finance by addressing regulatory risk and facilitating hedging. We use interview data on wind power financing costs ...
2017| Nils May, Karsten Neuhoff
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Diskussionspapiere 1620 / 2016
Nearly every carbon price regulates the production of carbon emissions, typically at midstream points of compliance, such as a power plant. Over the last six years, however, policymakers in Australia, California, China, Japan, and Korea implemented carbon prices that regulate the consumption of carbon emissions, where points of compliance are farther downstream, such as distributors or final consumers. ...
2016| Clayton Munnings, William Acworth, Oliver Sartor, Yong-Gun Kim, Karsten Neuhoff