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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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    References listed on IDEAS

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    Cited by:

    1. Gavard, Claire, 2016. "Carbon price and wind power support in Denmark," Energy Policy, Elsevier, vol. 92(C), pages 455-467.
    2. repec:eee:ecolec:v:141:y:2017:i:c:p:245-260 is not listed on IDEAS
    3. Vincent Bertrand, 2017. "Co-firing coal with biomass under mandatory obligation for renewable electricity: implication for the electricity mix," Working Papers 1704, Chaire Economie du climat.
    4. 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.
    5. repec:eee:enepol:v:106:y:2017:i:c:p:600-613 is not listed on IDEAS
    6. repec:gam:jeners:v:10:y:2017:i:8:p:1166-:d:107424 is not listed on IDEAS
    7. Delarue, Erik & Van den Bergh, Kenneth, 2016. "Carbon mitigation in the electric power sector under cap-and-trade and renewables policies," Energy Policy, Elsevier, vol. 92(C), pages 34-44.
    8. 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.
    9. 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.
    10. 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.
    11. repec:dui:wpaper:1504 is not listed on IDEAS
    12. 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.
    13. repec:kap:ejlwec:v:43:y:2017:i:2:d:10.1007_s10657-016-9550-3 is not listed on IDEAS
    14. repec:eee:eneeco:v:65:y:2017:i:c:p:251-261 is not listed on IDEAS
    15. Van den Bergh, Kenneth & Delarue, Erik, 2015. "Quantifying CO2 abatement costs in the power sector," Energy Policy, Elsevier, vol. 80(C), pages 88-97.
    16. 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.
    17. repec:eee:eneeco:v:66:y:2017:i:c:p:421-430 is not listed on IDEAS
    18. Ortega-Izquierdo, Margarita & del Río, Pablo, 2016. "Benefits and costs of renewable electricity in Europe," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 372-383.

    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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