Competition and environmental policies in an electricity sector

► We study the impact of competition and environmental policy in an electricity sector. ► The demand is expressed by two types of consumers whose behaviour depends or not on the weather, with incompressible consumption. ► Given the costs and demand functions, feed-in tariffs and emission allowances on the EU ETS can generate a conflict of interest when they are implemented together. ► Emission allowances on the EU ETS seems to be the only efficient policy in duopoly in terms of emission reduction and of production based on renewable energy sources. ► Feed-in tariffs benefit new entrants.