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CO2 abatement from renewables in the German electricity sector: Does a CO2 price help?

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  • Weigt, Hannes
  • Ellerman, Denny
  • Delarue, Erik

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 German electricity sector are reduced by 35 to 60Mtons, or 10% to 18% of what estimated emissions would have been without any RE policy but with the CO2 price remaining in place at the observed level. 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. This interaction effect is consistently positive for the German electricity system, at least for the considered years, and on the order of 0.5% to 1.5% of emissions.

Suggested Citation

  • Weigt, Hannes & Ellerman, Denny & Delarue, Erik, 2013. "CO2 abatement from renewables in the German electricity sector: Does a CO2 price help?," Energy Economics, Elsevier, vol. 40(S1), pages 149-158.
  • Handle: RePEc:eee:eneeco:v:40:y:2013:i:s1:p:s149-s158
    DOI: 10.1016/j.eneco.2013.09.013
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    1. Gavard, Claire, 2016. "Carbon price and wind power support in Denmark," Energy Policy, Elsevier, vol. 92(C), pages 455-467.
    2. Doda, Baran & Fankhauser, Sam, 2020. "Climate policy and power producers: The distribution of pain and gain," Energy Policy, Elsevier, vol. 138(C).
    3. Oliveira, Tiago & Varum, Celeste & Botelho, Anabela, 2019. "Wind power and CO2 emissions in the Irish market," Energy Economics, Elsevier, vol. 80(C), pages 48-58.
    4. Jie Wu & Ying Fan & Yan Xia, 2017. "How Can China Achieve Its Nationally Determined Contribution Targets Combining Emissions Trading Scheme and Renewable Energy Policies?," Energies, MDPI, Open Access Journal, vol. 10(8), pages 1-20, August.
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    6. Koch, Nicolas & Fuss, Sabine & Grosjean, Godefroy & Edenhofer, Ottmar, 2014. "Causes of the EU ETS price drop: Recession, CDM, renewable policies or a bit of everything?—New evidence," Energy Policy, Elsevier, vol. 73(C), pages 676-685.
    7. Descateaux, Paul & Astudillo, Miguel F. & Amor, Mourad Ben, 2016. "Assessing the life cycle environmental benefits of renewable distributed generation in a context of carbon taxes: The case of the Northeastern American market," Renewable and Sustainable Energy Reviews, Elsevier, vol. 53(C), pages 1178-1189.
    8. repec:dui:wpaper:1504 is not listed on IDEAS
    9. Branger, Frédéric & Quirion, Philippe, 2015. "Reaping the carbon rent: Abatement and overallocation profits in the European cement industry, insights from an LMDI decomposition analysis," Energy Economics, Elsevier, vol. 47(C), pages 189-205.
    10. Jinshan Zhu, 2017. "Assessing China’s price review policy on Clean Development Mechanism projects," European Journal of Law and Economics, Springer, vol. 43(2), pages 285-316, April.
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    13. Forbes, Kevin F. & Zampelli, Ernest M., 2019. "Wind energy, the price of carbon allowances, and CO2 emissions: Evidence from Ireland," Energy Policy, Elsevier, vol. 133(C).
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    16. Raphaël Trotignon & Pierre-André Jouvet & Boris Solier & Simon Quemin & Jérémy Elbeze, 2015. "European carbon market: lessons on the impact of a market stability reserve using the Zephyr model," Working Papers 1511, Chaire Economie du climat.
    17. Marcantonini, Claudio & Valero, Vanessa, 2017. "Renewable energy and CO2 abatement in Italy," Energy Policy, Elsevier, vol. 106(C), pages 600-613.
    18. Ahn, Young-Hwan & Jeon, Wooyoung, 2019. "Power sector reform and CO2 abatement costs in Korea," Energy Policy, Elsevier, vol. 131(C), pages 202-214.
    19. Zerrahn, Alexander & Krekel, Christian, 2015. "Sowing the Wind and Reaping the Whirlwind? The Effect of Wind Turbines on Residential Well-Being," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112956, Verein für Socialpolitik / German Economic Association.
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    21. Oliveira, Tiago & Varum, Celeste & Botelho, Anabela, 2019. "Econometric modeling of CO2 emissions abatement: Comparing alternative approaches," Renewable and Sustainable Energy Reviews, Elsevier, vol. 105(C), pages 310-322.
    22. Višković, Verena & Chen, Yihsu & Siddiqui, Afzal S., 2017. "Implications of the EU Emissions Trading System for the South-East Europe Regional Electricity Market," Energy Economics, Elsevier, vol. 65(C), pages 251-261.
    23. Van den Bergh, Kenneth & Delarue, Erik, 2015. "Quantifying CO2 abatement costs in the power sector," Energy Policy, Elsevier, vol. 80(C), pages 88-97.
    24. Kallabis, Thomas & Pape, Christian & Weber, Christoph, 2016. "The plunge in German electricity futures prices – Analysis using a parsimonious fundamental model," Energy Policy, Elsevier, vol. 95(C), pages 280-290.
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    More about this item

    Keywords

    Emission trading system; Renewables policy; Interaction; Emission abatement; Germany;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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