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Quantifying the net cost of a carbon price floor in Germany

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  • Egli, Philipp
  • Lecuyer, Oskar

Abstract

The German energy and climate policy mix is failing to decarbonize electricity production until now, with only 6% overall CO2 emissions reductions since 2005. Using empirical methods and hourly market data, we estimate the aggregate supply curve of the German power market and simulate the effect of a 20€/tCO2 and 40€/tCO2 carbon price floor on the German power market and on the renewable subsidy scheme. With the 40€/tCO2 carbon price floor, median prices increase by 37€/MWh and average price peaks by 50€/MWh. At the wholesale level, the market's annual volume increases by some €18 billion to €39 billion. At the retail level, however, the net cost to consumers is moderated due to costs savings from the renewable subsidy scheme worth some €4 billion, or roughly one-fifth. The same ratio applies to a price floor at 20€/tCO2.

Suggested Citation

  • Egli, Philipp & Lecuyer, Oskar, 2017. "Quantifying the net cost of a carbon price floor in Germany," Energy Policy, Elsevier, vol. 109(C), pages 685-693.
  • Handle: RePEc:eee:enepol:v:109:y:2017:i:c:p:685-693
    DOI: 10.1016/j.enpol.2017.07.035
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    Cited by:

    1. David M. Newbery & David M. Reiner & Robert A. Ritz, 2018. "When is a carbon price floor desirable?," Working Papers EPRG 1816, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. repec:eee:eneeco:v:78:y:2019:i:c:p:301-311 is not listed on IDEAS

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