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Europe’s climate goals and the electricity sector

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  • Eskeland, Gunnar S.
  • Rive, Nathan A.
  • Mideksa, Torben K.

Abstract

EU's objective of attaining 20% reductions in greenhouse gas emissions by 2020 is analysed with a general equilibrium model detailing electricity generation technologies and capital vintaging. Consistent with theory and other analysts we find that the nonuniform treatment of emitting sectors in EU raises abatement costs – by a factor of two to three. Under cost effective emission reductions – a more comprehensive tradable cap—electricity generation abates more than its proportional share in emissions. The European economy abates by substitution towards natural gas, by energy efficiency improvements, and by reductions in emission intensive manufactures. Applied policies such as renewable support – and responses such as carbon leakage – hold down the prices for emission and electricity, thus also holds down incentives for energy efficiency and technological change. This leads to little preparation for the future and global mitigation.

Suggested Citation

  • Eskeland, Gunnar S. & Rive, Nathan A. & Mideksa, Torben K., 2012. "Europe’s climate goals and the electricity sector," Energy Policy, Elsevier, vol. 41(C), pages 200-211.
    • Handle: RePEc:eee:enepol:v:41:y:2012:i:c:p:200-211
    DOI: 10.1016/j.enpol.2011.10.038
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    2. Yang Liu & Taoyuan Wei, 2016. "Linking the emissions trading schemes of Europe and China - Combining climate and energy policy instruments," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 21(2), pages 135-151, February.
    3. Keleş, S. & Bilgen, S., 2012. "Renewable energy sources in Turkey for climate change mitigation and energy sustainability," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(7), pages 5199-5206.
    4. Eskeland, Gunnar S., 2013. "Leadership in Climate Policy: Is there a case for Early Unilateral Unconditional Emission Reductions?," Discussion Papers 2013/6, Norwegian School of Economics, Department of Business and Management Science.
    5. Bohl, Martin T. & Kaufmann, Philipp & Stephan, Patrick M., 2013. "From hero to zero: Evidence of performance reversal and speculative bubbles in German renewable energy stocks," Energy Economics, Elsevier, vol. 37(C), pages 40-51.
    6. Martin Bohl & Philipp Kaufmann & Patrick Stephan, 2012. "From Hero to Zero: Evidence of Performance Reversal and Speculative Bubbles in German Renewable Energy Stocks," CQE Working Papers 2412, Center for Quantitative Economics (CQE), University of Muenster.

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