Balancing decarbonisation pathways: a comparative analysis of the effects of carbon pricing strategies on the decarbonisation of the EU energy system via a linked modelling approach

Achieving the European Union’s decarbonisation goals while safeguarding a reliable energy transition presents a complex policy challenge. This paper addresses this challenge through an integrated modelling approach that combines a system dynamics-based Integrated Assessment Model, pymedeas, with an agent-based model of the electricity market, TaxvsETS ABM. The two models are linked through a one-way transfer of information, whereby a realistic EU decarbonisation pathway derived from pymedeas2 is used to constrain the TaxvsETS ABM, allowing assessment of whether the faster decarbonisation achieved by Carbon Taxes remains robust under a realistic ETS cap and an equivalent carbon price. The linked framework combines decarbonisation pathway with firms' adaptive investment behaviours, enabling the comparison of alternative carbon pricing policies under empirically informed transition conditions. Results suggest that even when the ETS is calibrated using a realistic decarbonisation pathway derived from the integrated assessment model and compared under equivalent policy stringency, carbon taxes continue to outperform emissions trading schemes in terms of decarbonisation speed, cumulative emissions reductions, and investment efficiency. However, broader governance and political economy considerations also influence the feasibility and equity of implementation. This study further demonstrates the value of hybrid modelling frameworks in supporting the evaluation of alternative carbon pricing policies within complex socio-technical systems