Subsidising carbon capture. Effects on energy prices and market shares in the power market
AbstractThis paper examines how ambitious climate policies and subsidies to carbon capture may affect international energy prices and market shares in the power market. A detailed numerical model of the international energy markets is used. We first conclude that an ambitious climate policy alone will have substantial effects in the power market, with considerable growth in renewable power production and eventually use of carbon capture. Gas power production will also benefit from such a policy. Subsidising carbon capture and storage (CCS) will significantly accelerate the use of this technology. Nevertheless, total production of coal and gas power (with or without CCS) is only marginally increased, as the subsidy mainly leads to installation of CCS equipment on existing plants, reducing the efficiency from these plants. Consequently, electricity prices are almost unchanged, and the substantial growth in renewable power production is hardly affected by the subsidies to CCS.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 595.
Date of creation: Oct 2009
Date of revision:
Energy markets; Climate policy; Carbon capture;
Find related papers by JEL classification:
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-CMP-2009-10-24 (Computational Economics)
- NEP-ENE-2009-10-24 (Energy Economics)
- NEP-ENV-2009-10-24 (Environmental Economics)
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