Combining policy instruments for sustainable energy systems: An assessment with the GMM model

An assessment of the impact of an illustrative portfolio of policy instruments that address different sustainability concerns in the global energy system in areas of climate change, air pollution and introduction of renewable-energy resources is conducted. The effects of a policy set containing three instruments, implemented either individually or in combination, were examined. The policy instruments under examination in this work include: Cap-and-Trade policies imposing a CO2 emission reduction target on the global energy system, a renewable portfolio standard that forces a minimum share of renewable electricity generation, and the internalisation of external costs of power generation associated with local pollution. Implementation of these policy instruments significantly changes the structure and environmental performance of the energy sector, and particularly the structure of the electric-generation sector. The positive effects are amplified when the policy instruments are simultaneously applied, illustrating the potential for synergies between these energy-policy domains. The analysis has been conducted with the multi-regional, energy-system Global MARKAL Model (GMM), a "bottom-up” partial-equilibrium model that provides a detailed representation of energy technologies and endogenizes technology learnin