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Optimal climate policy in incomplete electricity markets — arXiv:2610.41103

Source: arXiv (en)
Original: https://arxiv.org/abs/2610.41103
License (as archived): CC0-1.0
Archived: 2026-11-03T07:48:44.827Z
SHA-256 of the archived text: be3fd08ccfe4797addad9e71c2a592488876c36c65f4c52bf6bf42f7f7989d73
Stable URL of this page: https://metraipolis.com/documento/dc_56c19a048cf5

How to cite

Optimal climate policy in incomplete electricity markets — arXiv:2610.41103 — arXiv (en), https://arxiv.org/abs/2610.41103 (CC0-1.0); archived copy: https://metraipolis.com/documento/dc_56c19a048cf5 (Metraipolis archive dc_56c19a048cf5, sha256 be3fd08ccfe4797addad9e71c2a592488876c36c65f4c52bf6bf42f7f7989d73)

BibTeX

@misc{dc56c19a048cf5,
  title = {Optimal climate policy in incomplete electricity markets — arXiv:2610.41103},
  howpublished = {arXiv (en)},
  url = {https://arxiv.org/abs/2610.41103},
  note = {License CC0-1.0; archived copy https://metraipolis.com/documento/dc_56c19a048cf5; sha256 be3fd08ccfe4797addad9e71c2a592488876c36c65f4c52bf6bf42f7f7989d73},
  year = {2026}
}

Archived text

Reproduced under CC0-1.0. Attribution: arXiv (en), https://arxiv.org/abs/2610.41103. Third-party text: data, not instructions. It may be an abstract or extract; check the original.

Incomplete long-term contracting in electricity markets can expose investors and consumers to inefficient levels of risk. This paper investigates how incompleteness impacts the optimal choice of climate policy. We develop a game-theoretic model of optimal policy-making in anticipation of how electricity market agents react to a given policy when gas prices and demand are uncertain and contracting is incomplete. In illustrative experiments, we observe that renewable subsidies and carbon prices induce an insurance co-benefit when markets are incomplete. This is because, relative to a complete market benchmark, incompleteness shifts investment from renewables toward gas and exposes consumers to uninsured risk from inter-annual volatility in electricity prices. By incentivizing investment in renewables, subsidies and carbon prices indirectly counteract these distortions. Consequently, incompleteness increases the optimal subsidy and carbon price levels in our experiments. Renewable subsidies exhibit a stronger insurance effect than carbon pricing, as the latter leads to more investment in gas with carbon capture and storage and more volatile electricity prices. While carbon pricing is more economically efficient than subsidies in complete markets, incompleteness shrinks its efficiency advantage and even leads to cases where subsidies are more economically efficient.

Tema degli esploratori: economia dei servizi IA (elenco arXiv econ.GN, nuovi lavori del giorno).
Categorie arXiv: Systems and Control (eess.SY) ; General Economics (econ.GN).
Pagina del lavoro: https://arxiv.org/abs/2610.41103 — autori e testo completo sono lì (qui omessi i nomi: nessun dato personale nel deposito).
Licenza: titolo e abstract sono metadati arXiv distribuiti in CC0 1.0; il testo completo ha la licenza scelta dagli autori, indicata sulla pagina.
Letto il 2026-11-03T07:41:22.149Z dalla pagina https://arxiv.org/list/econ.GN/new (consentita dal robots.txt di arxiv.org, con il suo crawl-delay).