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Supply of renewable energy sources and the cost of EU climate policy

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  • Stefan Boeters

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  • J. Koornneef

Abstract

What are the excess costs of a separate 20% target for renewable energy as a part of the EU climate policy for 2020? We answer this question using a computable general equilibrium model, WorldScan, which has been extended with a bottom-up module of the electricity sector. The model set-up makes it possible to directly use available estimates of costs and capacity potentials for renewable energy sources for calibration. In our base case simulation, the costs of EU climate policy with the renewables target are 6% higher than those of a policy without this target. As information on the supply of renewable energy is scarce and uncertain, we perform an extensive sensitivity analysis with respect to the level and steepness of the supply curves for wind energy and biomass. In the range we explore, the excess costs vary from zero (when the target is not binding) to 23% (when the cost progression and the initial cost disadvantage for renewables are doubled).

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 142.

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Date of creation: Feb 2010
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Handle: RePEc:cpb:discus:142

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  1. Jean-Charles Hourcade, Mark Jaccard, Chris Bataille, and Frederic Ghersi , 2006. "Hybrid Modeling: New Answers to Old Challenges Introduction to the Special Issue of The Energy Journal," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 1-12.
  2. McFarland, J. R. & Reilly, J. M. & Herzog, H. J., 2004. "Representing energy technologies in top-down economic models using bottom-up information," Energy Economics, Elsevier, vol. 26(4), pages 685-707, July.
  3. Messner, Sabine & Schrattenholzer, Leo, 2000. "MESSAGE–MACRO: linking an energy supply model with a macroeconomic module and solving it iteratively," Energy, Elsevier, vol. 25(3), pages 267-282.
  4. Katja Schumacher & Ronald D. Sands, 2006. "Where Are the Industrial Technologies in Energy-Economy Models?: An Innovative CGE Approach for Steel Production in Germany," Discussion Papers of DIW Berlin 605, DIW Berlin, German Institute for Economic Research.
  5. Resch, Gustav & Held, Anne & Faber, Thomas & Panzer, Christian & Toro, Felipe & Haas, Reinhard, 2008. "Potentials and prospects for renewable energies at global scale," Energy Policy, Elsevier, vol. 36(11), pages 4048-4056, November.
  6. Doukas, Haris & Mannsbart, Wilhelm & Patlitzianas, Konstantinos D. & Psarras, John & Ragwitz, Mario & Schlomann, Barbara, 2007. "A methodology for validating the renewable energy data in EU," Renewable Energy, Elsevier, vol. 32(12), pages 1981-1998.
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Cited by:
  1. Jägemann, Cosima, 2012. "Decarbonizing Europe’s power sector by 2050 - Analyzing the implications of alternative decarbonization pathways," EWI Working Papers 2012-13, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  2. Amigues, Jean-Pierre & Chakravorty, Ujjayant & Lafforgue, Gilles & Moreaux, Michel, 2012. "Renewable Portfolio Standards and implicit tax-subsidy schemes: Structural differences induced by quantity and proportional mandates," LERNA Working Papers 12.02.359, LERNA, University of Toulouse.
  3. Flues, Florens & Löschel, Andreas & Lutz, Benjamin Johannes & Schenker, Oliver, 2013. "Ups and downs: How economic growth affects policy interactions," ZEW Discussion Papers 13-066, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Stefan Boeters & Johannes Bollen, 2012. "Fossil Fuel Supply, Leakage and the Effectiveness of Border Measures in Climate Policy," CPB Discussion Paper 215, CPB Netherlands Bureau for Economic Policy Analysis.
  5. Jägemann, Cosima & Fürsch, Michaela & Hagspiel, Simeon & Nagl, Stephan, 2013. "Decarbonizing Europe's power sector by 2050 — Analyzing the economic implications of alternative decarbonization pathways," Energy Economics, Elsevier, vol. 40(C), pages 622-636.
  6. Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2011. "Renewable Energy Subsidies: Second-Best Policy or Fatal Aberration for Mitigation?," Working Papers 2011.48, Fondazione Eni Enrico Mattei.
  7. Van den Bergh, Kenneth & Delarue, Erik & D'haeseleer, William, 2013. "Impact of renewables deployment on the CO2 price and the CO2 emissions in the European electricity sector," Energy Policy, Elsevier, vol. 63(C), pages 1021-1031.
  8. Boeters, Stefan, 2013. "Optimally Differentiated Carbon Prices for Unilateral Climate Policy," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79738, Verein für Socialpolitik / German Economic Association.
  9. Johannes Bollen & Corjan Brink (PBL), 2012. "Air Pollution Policy in Europe: Quantifying the Interaction with Greenhouse Gases and Climate Change Policies," CPB Discussion Paper 220, CPB Netherlands Bureau for Economic Policy Analysis.

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