Evaluating policy mix strategies for the energy transition using an agent-based macroeconomic model

Climate policy analysis has traditionally focused on evaluating individual policy instruments or comparing different instruments, but an increasing number of scholars are emphasizing the advantages of employing a policy mix. In this study, we investigate the combination of a carbon tax and a feed-in tariff policy using the Eurace agent-based model, addressing two primary issues: understanding the interactions between individual instruments within the policy mix and identifying the optimal combination to facilitate the energy transition. To evaluate the effects of each policy, we first examine policies in isolation and then analyse their combined impact. The results indicate that the feed-in tariff policy generally outperforms the carbon tax when considering both climate and economic indicators. Furthermore, when physical climate feedback is not included in the model, the combined policy approach outperforms the individual policies. However, for higher values of the carbon tax and feed-in tariff, the benefits of the policy mix decrease, and this reduction becomes more pronounced when physical climate feedback is considered.