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

  • Boeters, Stefan
  • Koornneef, Joris

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 base the calibration directly on available estimates of costs and capacity potentials for renewable energy sources. 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. The uncertainty in this estimate is considerable, however, and depends on our assumptions about the availability of low-cost renewable energy: the initial cost level, the steepness of the supply curves and share of renewable energy in the baseline. Within the range we explore, the excess costs vary from zero (when the target is not a binding constraint) to 32% (when the cost progression and the initial cost disadvantage for renewable energy are high and its initial share is low).

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 5 (September)
Pages: 1024-1034

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Handle: RePEc:eee:eneeco:v:33:y:2011:i:5:p:1024-1034
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  1. 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.
  2. Stefan Boeters & Ton Manders & Gerard Verweij & M.G.J. den Elzen & Veenendaal. P.J.J., 2007. "Post-2012 climate policy scenarios," CPB Special Publication 70, CPB Netherlands Bureau for Economic Policy Analysis.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
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