PÖYRY POINT OF VIEW ARTICLE / 14 Nov 2013
From ambition to reality? Decarbonisation of the European electricity sector
Decarbonisation of the electricity sector is central to Europe’s plans to reduce carbon emissions in an effort to tackle climate change. But the policy and market design framework for delivering decarbonisation remains uncertain.
Europe is facing a policy dilemma
Most sector stakeholders support a market-based approach in which a strong CO2 pricing regime drives investment in low carbon generation. However, government-sponsored policies, such as direct financial support or organised mechanisms for capacity procurement, are increasingly being used to deliver the ‘required’ mix of generation instead. Europe is facing a policy dilemma:
- rely on markets, European coordination and a strong CO2 pricing regime or
- build national solutions with government channelled investment.
What is a workable model for future electricity market design, given stated policy objectives towards decarbonisation?
This Pöyry Point of View examines how European electricity markets could evolve to meet the decarbonisation challenge. It probes both market-based and regulated approaches to understand the implications and credibility of different options in order to consider this critical question.