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CO2 Abatement from RES Injections in the German Electricity Sector: Does a CO2 Price Help?

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Author Info

  • Ellerman Denny
  • Delarue Erik
  • Hannes Weigt

    ()
    (University of Basel)

Abstract

The overlapping impact of the Emission Trading System (ETS) and renewable energy (RE) deployment targets creates a classic case of interaction effects. Whereas the price interaction is widely recognized and has been thoroughly discussed, the effect of an overlapping instrument on the abatement attributable to an instrument has gained little attention. This paper estimates the actual reduction in demand for European Union Allowances that has occurred due to RE deployment focusing on the German electricity sector, for the five years 2006 through 2010. Based on a unit commitment model we estimate that CO2 emissions from the electricity sector are reduced by 33 to 57 Mtons, or 10% to 16% of what estimated emissions would have been without any RE policy. Furthermore, we find that the abatement attributable to RE injections is greater in the presence of an allowance price than otherwise. The same holds for the ETS effect in presence of RE injection. T his interaction effect is consistently positive for the German electricity system, at least for these years, and on the order of 0.5% to 1.5% of emissions.

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Bibliographic Info

Paper provided by Faculty of Business and Economics - University of Basel in its series Working papers with number 2012/14.

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Date of creation: 2012
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Handle: RePEc:bsl:wpaper:2012/14

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Postal: Peter-Merian-Weg 6, Postfach, CH-4002 Basel
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Related research

Keywords: ETS; RE policy; interaction; emission abatement; Germany;

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References

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  1. Weigt, Hannes, 2009. "Germany's wind energy: The potential for fossil capacity replacement and cost saving," Applied Energy, Elsevier, vol. 86(10), pages 1857-1863, October.
  2. Klaus Skytte, 2006. "Interplay between Environmental Regulation and Power Markets," EUI-RSCAS Working Papers 4, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  3. De Jonghe, Cedric & Delarue, Erik & Belmans, Ronnie & D'haeseleer, William, 2009. "Interactions between measures for the support of electricity from renewable energy sources and CO2 mitigation," Energy Policy, Elsevier, vol. 37(11), pages 4743-4752, November.
  4. Jensen, Stine Grenaa & Skytte, Klaus, 2003. "Simultaneous attainment of energy goals by means of green certificates and emission permits," Energy Policy, Elsevier, vol. 31(1), pages 63-71, January.
  5. A. Ellerman & Barbara Buchner, 2008. "Over-Allocation or Abatement? A Preliminary Analysis of the EU ETS Based on the 2005–06 Emissions Data," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(2), pages 267-287, October.
  6. Morthorst, P. E., 2001. "Interactions of a tradable green certificate market with a tradable permits market," Energy Policy, Elsevier, vol. 29(5), pages 345-353, April.
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Citations

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Cited by:
  1. A. Denny Ellerman, 2014. "The Implicit Carbon Price of Renewable Energy. Incentives in Germany," EUI-RSCAS Working Papers p0376, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  2. Vincent Bertrand, 2013. "Carbon and energy prices under uncertainty: A theoretical analysis of fuel switching with non-equally efficient power plants," Working Papers 1309, Chaire Economie du Climat.

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