This case study analyses potential interactions between the Energy Efficiency Obligation scheme (EEO) and the European Union's Emissions Trading Scheme (EU ETS) in Greece. Such interactions could work in both directions. On the one hand, energy efficiency measures may lead to lower electricity demand and thus reduce the demand of ETS power sector installation for allowances. On the other hand, the ETS market price can lead to a higher wholesale price for electricity which electricity distributors can pass on to consumers, so that they have an incentive to save energy. In order to understand potential interaction effects between the existing EU ETS scheme and the EEO scheme in Greece and whether their parallel operation contradicts their intended outcomes or causes potential unintended effects (e.g. environmental side-effects or distributional effects), this case study analyses possible interactions between an EEO scheme for retail energy sales companies in Greece and the obligations for energy-producing installations in Greece that are covered by the ETS.
This case study highlights the following implications regarding the introduction of the Greek EEO scheme upon the Greek energy market:
- The increasing compliance costs of the combined EEO and ETS scheme for energy producers are most likely to be passed on to electricity consumers, lowering their consumer surplus significantly especially in the short-term.
- The EEO scheme and its short-term targets may jeopardise the attainment of long-term GHG emission targets due to a lower price for allowances which may implicitly put off R&D efforts in more efficient low emission technologies.
- Investments in RES technology in end-use sectors (e.g. buildings or transport) are discouraged within the implementation of the obligation scheme.
- The use of revenues from auctioning emissions allowances in the power sector can be used to support energy savings at the end use level. Hence the impact of the EU ETS on the EEO scheme and EE improvements could become more positive.