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

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  • Boeters, Stefan
  • Koornneef, Joris

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 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).

Suggested Citation

  • Boeters, Stefan & Koornneef, Joris, 2011. "Supply of renewable energy sources and the cost of EU climate policy," Energy Economics, Elsevier, vol. 33(5), pages 1024-1034, September.
    • Handle: RePEc:eee:eneeco:v:33:y:2011:i:5:p:1024-1034
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    More about this item

    Keywords

    EU climate policy Renewable energy Computable general equilibrium model;

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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