Lowest-cost Abatement in Light of the EU ETS and Renewable Feed-in Tariffs in the Electricity Sector in Bulgaria

The European Union (EU) climate and energy package has laid the ground for factoring in the costs of externalities from economic activities. Bulgaria has implemented the package with its competing policy instruments-emissions trading and renewable feed-in tariffs. Considering that these incentives to foster carbon abatement have created a playing field for investments in clean technologies, any lack of coordination may produce unintended consequences. There are indications that the main principle underpinning the EU emissions trading scheme (EU ETS), which is to allow emission reductions to take place in a cost-effective manner, has been disregarded under the pressure to adopt feed-in tariffs.