A0467
Title: The carbon policy paradox: Divergent impacts of short-term vs. long-term policies
Authors: Shih-Kuei Lin - National Chengchi University (Taiwan) [presenting]
Abstract: The impact of the EU Emission Trading Scheme (EU ETS) policies on the oil market is investigated. Using a novel term structure model of oil and carbon futures, factors specific to carbon markets are filtered out, and links to short-term and long-term carbon policies are established. A horizon analysis of the carbon policies' impacts on oil supply and demand dynamics uncovers a "carbon policy paradox'': While short-term carbon policies intend to curb fossil fuel use through temporary carbon market intervention, they inadvertently lead to unintended consequences, including increased oil supply and consumption. In contrast, long-term carbon policies that demonstrate the EU ETS's commitment to decarbonization are able to effectively reduce oil dependence. Findings highlight the divergent impacts of carbon policies on emission reduction targets, underscoring the importance of policy horizon in achieving sustainable outcomes.
