The Interactions between Carbon Regulation and Renewable Energy policies in the United Kingdom

The power sector is experiencing profound changes worldwide as policies are enacted to address the linkages between energy use and environmental degradation, as well as improve energy security and local economic development outcomes. This research examines the carbon dioxide (CO2) cap and the renewable energy quota in the United Kingdom\u27s power sector using a constrained optimization model of the U.K. electricity grid. Scenarios simulate the dynamic nature of the supply curve for CO2 mitigation based on the availability of nuclear technologies, energy efficiency investments, fossil fuel prices, and access to emissions reductions from the EU CO2 Cap. The analysis shows that energy efficiency investments underpin the success of both the CO2 and renewables programs. Energy efficiency investments can eliminate the need for new nuclear plants and make compliance with the CO2 cap significantly cheaper. Under Baseline fuel prices, the CO2 cap is a more efficient and effective means of reducing CO2 emissions than the renewables quota and will add considerable renewables by itself, effectively making the renewables quota redundant. The modeling results explicate the conditions under which the CO2 cap and the renewables target compliment each other and when they conflict with each other. The modeling also indicates that efficiency investments and renewable energy deployment under the CO 2 cap increase energy security in 2020 by reducing U.K. dependency on natural gas for electricity generation. While the CO2 cap and the renewables programs are likely to meet their programmatic goals, the two programs are far from optimal in design and administration. Potential institutional rivalries prevented a thorough examination of the interactions between the two programs and how to effectively administer them jointly. Furthermore, the design of both programs results in increases in the price of electricity without recycling any of the increase in producer profits back to consumers, leading to huge shifts of wealth between sectors. Because of these factors, the U.K. implementation of the EU Directive on the CO2 cap has important implications for theories of multilevel governance