EU-ETS under attack? The impact of carbon price suppression on the decarbonization of the power sector

Imagine the electricity grid as a giant, high-stakes video game where the goal is to power our cities without burning the planet. In this game, there's a special "pollution tax" called the carbon price. Think of it like a penalty fee added to the cost of playing with dirty, fossil-fuel characters (like coal and gas). When this fee is high, it makes dirty players expensive to use, which naturally pushes everyone to switch to cleaner, free-to-play characters like solar panels and wind turbines. This system is designed to make the transition to green energy happen automatically because it's the smartest financial move. But recently, some governments have been worried that the game is getting too expensive for regular players (us, the consumers) because of rising global tensions. So, they've started asking: "What if we temporarily hide the pollution fee for the gas players just to lower the bills right now?"

This is the exact question a team of researchers at Politecnico di Milano and other European institutions tackled in a new study. They wanted to know if hiding that pollution fee would actually save us money in the long run, or if it would be a trick that costs us more later. To find out, they didn't just guess; they built a super-smart computer simulation called MARLEY. Think of MARLEY as a digital time machine that runs thousands of years of the electricity market in a few hours. It uses "artificial intelligence" agents—virtual power companies and a virtual government—that learn and adapt just like real humans do. They tested what happens when the government steps in to lower the cost of gas power, mimicking a real Italian policy proposal called the Decreto Bollette.

The results of their time-traveling simulation tell a story with a twist. In the short term, the plan works exactly as the politicians hope: the bills go down. By hiding the carbon penalty, the virtual gas power plants become cheaper to run, and the immediate price of electricity drops. It's like getting a discount coupon at the grocery store; everyone is happy for a moment. However, the simulation reveals a nasty surprise waiting in the future. Because the pollution fee is hidden, the virtual power companies stop investing in solar panels, wind turbines, and batteries. Why build expensive new green tech when the old, dirty gas plants are suddenly cheap again?

As the simulation rolls forward toward the year 2040, the bill comes due. The emissions from the gas plants skyrocket because no one built enough green replacements. The study shows that in the worst-case scenario (where there is no specific support for green investments), CO2 emissions can rise by nearly 57% compared to the normal path, with even higher increases in some mid-to-long-term periods. The "discount" on the electricity bill turns out to be a loan with terrible interest rates. Eventually, the cost of all that extra pollution has to be paid for, often through taxes or higher tariffs later on, meaning consumers end up paying for the same energy twice: once for the cheap gas and again to clean up the mess.

The researchers also tested a "what if" scenario where the government promised to restore the pollution fee later. Even then, the damage was done. The uncertainty made the virtual companies hesitant to invest, delaying the switch to green energy and leaving the system vulnerable to gas price shocks. The only way to stop this disaster in the simulation was to have a very aggressive, long-term plan where the government guaranteed huge support for green investments before the pollution fee was hidden. But the study points out a contradiction: the same political will needed to hide the pollution fee is usually the same will that refuses to commit to the massive, expensive green investment plans needed to fix the problem.

In the end, the paper suggests that while hiding the carbon price feels like a quick fix for high energy bills, it's actually a trap. It tricks the market into sticking with dirty fuel, causing emissions to rise significantly and long-term costs to stay high. The simulation shows that the only way to keep the lights on cheaply and cleanly is to keep the pollution price visible, so the market knows exactly what it needs to build next. The "easy" path of lowering prices today might just be the most expensive road to take tomorrow.