The impact of the carbon constraint on the European electricity sector.

Summary The general idea of the thesis is that the European Emissions Trading Scheme (ETS) is an instrument that can facilitate the decarbonization of the European electricity system. However, the conditions must be met in a liberalized context, in terms of risk management, market architecture and the implementation of complementary public policy instruments, for the new carbon price signal to be fully effective. The introduction of liberalization in the electricity industry significantly conditions investment behavior and technological choices. The analysis of the theoretical model of the market demonstrates its organizational inadequacy to adapt to long-term problems due to price signals that are difficult to interpret. The introduction of the EU ETS is superimposed on the market risks inherent to liberalization. The expansion of the carbon market also influences the carbon price anticipated by European investors, as does the interaction between the European emission reduction targets and the targets for increasing renewable electricity by 2020. The use of the POLES forecasting model allows us to examine these various carbon market configurations and to establish possible carbon price scenarios. A number of measures to reduce carbon price volatility are recommended. The modeling exercises using the POLES model also allow for the examination of long-term European technology mixes under carbon price uncertainty. They therefore show that it is possible to have a less emitting electricity production structure in the future. The remaining challenge is to build an organizational and institutional framework that will encourage the necessary investments in the near future.