A number of major challenges related to the use of fossil fuels provide a rationale for public policy intervention, i.e. limiting carbon dioxide emissions to mitigate climate change, lowering air pollution to reduce health costs and enhancing the security of energy supply. A transition from fossil-based to sustainable energy systems dominated by renewable energy sources can address these challenges. The conditions for such a transition are complex and touch on the fundamental question of how the environment and the economy, including technology, interact in decentralised market-based systems. Public policy is the primary means by which the government can influence market decisions of firms and consumers regarding energy supply and demand.
The research area “Market Mechanisms and Decarbonisation Policies” aims to understand the role of public policy and markets in the causes of the climate and energy problem and its solution. To this end, we use conceptual thinking and quantitative-empirical methods to model economy-energy-environment interactions and systems, allowing the evaluation of market and policy interventions in an artificial laboratory environment.