Interaction between the carbon tax and renewable energy support schemes in Colombia- Complementary or overlapping?

University essay from Lunds universitet/Internationella miljöinstitutet

Abstract: Colombia is advancing its mitigation and renewable energy policy instruments implementation. Specifically, the country has introduced support schemes for electricity generation from renewable energy sources (RES-E) and a national carbon tax. Therefore, these two instruments interact within the climate-energy policy mix. However, the interaction between them could be complementary or overlapping depending on the policy design of each instrument. The main objective of this thesis is to analyze if the policy design elements of the carbon tax and the RESE support schemes make them complementary or overlapping instruments. This specifically through the comparison of the instruments’ policy objectives. Furthermore, the thesis elaborates on why the coexistence of both instruments is justified. The methodology was mainly qualitative and encompassed descriptive as well as interpretive stages. Additionally, it comprised a comprehensive literature review on the interaction between mitigation, as well as, renewable energy policy instruments and a content analysis based on interviews with related stakeholders. Results show that the policy objective design element from the instruments was crucial to classify them as complementary and to conclude that their coexistence is justified. This is, the mitigation objective of the carbon tax and the energy security aim of the RES-E support schemes suggest both instruments are complementary. Moreover, an essential policy design element like the nature of the instrument is fundamental on the way it will interact with other instruments. For instance, a quantity-based instrument such as an emission trading scheme will interact differently than a price-based instrument, e.g. a carbon tax, with a RES-E support scheme. In an ETS the carbon price might change with the introduction of a RES-E support scheme, whereas the carbon rate in the tax will be always the same. Consequently, the thesis also found further research areas which include to analyze the effect of the existent RES-E support schemes on the carbon price within an ETS. This considering that currently there is a price floor provided by the carbon tax.

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