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Cost of achieving zero CO2 emissions by mid-century: Approach and estimation for the world largest economies

Author

Listed:
  • Kolpakov, A.

    (Institute of Economic Forecasting, Russian Academy of Sciences, Moscow, Russia)

  • Yantovskii, A.

    (Institute of Economic Forecasting, Russian Academy of Sciences, Moscow, Russia)

  • Galinger, A.

    (Institute of Economic Forecasting, Russian Academy of Sciences, Moscow, Russia)

Abstract

The article presents a methodological approach to assessing the cost of energy for the world economy in ambitious scenarios for reducing CO2 emissions associated with energy consumption. The approach takes into account that large-scale replacement of fossil fuels with electricity generated from renewable energy sources: a) should be accompanied by the grid development and the deployment of reserve storage capacities and hydrogen technologies; b) requires the use of mechanisms for projects payback, which are included in the final prices for electricity; c) will create the need to replace the shortfall in budget revenues from the production and consumption of hydrocarbon fuels. Forecast calculations show that the scenario of achieving zero emissions in the middle of the XXI century may turn out to be unstable, since it is characterized by increase in the cost of energy supply to the world economy by 40% compared to the current level, and the ratio of energy costs to GDP will exceed 13% in certain periods, and for some countries (including Russia) - 15%. For the global economy to remain within its solvency limits, hydrocarbons should play a decisive role in energy supply for another two decades, but the growth in energy demand can increasingly be met with the help of carbon-free solutions.

Suggested Citation

  • Kolpakov, A. & Yantovskii, A. & Galinger, A., 2022. "Cost of achieving zero CO2 emissions by mid-century: Approach and estimation for the world largest economies," Journal of the New Economic Association, New Economic Association, vol. 55(3), pages 139-154.
    • Handle: RePEc:nea:journl:y:2022:i:55:p:139-154
    DOI: 10.31737/2221-2264-2022-55-3-7
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    References listed on IDEAS

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    1. Veselov, Fedor & Pankrushina, Tatiana & Khorshev, Andrey, 2021. "Comparative economic analysis of technological priorities for low-carbon transformation of electric power industry in Russia and the EU," Energy Policy, Elsevier, vol. 156(C).
    2. Steffen, Bjarne, 2020. "Estimating the cost of capital for renewable energy projects," Energy Economics, Elsevier, vol. 88(C).
    3. I. Bashmakov., 2006. "Oil Prices: Limits to Growth and the Depth of Falling," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 3.
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    Cited by:

    1. Mikhail Andreyev & Alyona Nelyubina, 2024. "Energy transition scenarios in Russia: effects in macroeconomic general equilibrium model with rational expectations," Bank of Russia Working Paper Series wps122, Bank of Russia.

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    More about this item

    Keywords

    CO2; emissions; renewable energy; energy price; investments; Paris Agreement;
    All these keywords.

    JEL classification:

    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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