Policy interactions and electricity generation sector CO2 emissions: A quasi-experimental analysis

Abstract

This paper evaluates the static and dynamic effects of four national climate and energy policies—carbon tax, emission trading system (ETS), renewable energy auctions, and feed-in policy—on reducing CO2 emissions per capita in the electricity generation sector. Using a panel of 109 countries over 30 years, this study applies difference-in-differences (DID) and synthetic DID methods to exploit policy timing, income level, and geographic variations. Results show that while most static policy interactions may not reduce emissions, some reductions are observed when combined carbon pricing and renewable policies. The dynamic interactions of ETS may have contributed to CO2 emission reductions in countries that adopted them, conditional on economic development and governance. Carbon pricing and feed-in policies could mitigate CO2 emissions by promoting renewable energy supply and reducing carbon intensity. Using a quasi-experimental approach, this study contributes to the empirical literature on the effects of four key policy interactions on CO2 emissions in global electricity generation. The findings highlight the need for tailored policy combinations to decarbonize the electricity generation sector, considering each country's specific circumstances, such as development level and governance.