The impact of German CO2, reduction targets on the European electricity market

This study shows that due to the European competition among producers of electric power and the EU emissions trading system, national measures for the reduction of C02 emissions in the electricity sector will result in a relocation of power generation and the related emissions to other European countries which means that these measures are ineffective for the climate policy. A climate policy restricted to Germany with national climate objectives will obstruct the electricity trading markets and emission abatement targets established at a European level. Such a policy is counterproductive because it will increase the overall costs of C02 abatement in Europe. Any and all political measures revolving around the climate have to be compatible with the competition among European producers and with the EU ETS. In general, emissions trading should be strengthened as a central instrument of climate politics and not be undermined by any unilateral national measures. Only within the scope of a European measure will an efficient and effective abatement of C02 emissions be possible in Europe while the most cost-effective abatement options should be used.