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Low Carbon Electricity Investment: The Limitations of Traditional Approaches and a Radical Alternative

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Abstract

Moving to a very low carbon electricity system is central to meeting the goals of UK energy policy, and indeed to the wider global challenge of tackling climate change. This will require massive investment in low carbon electricity sources. This working paper identifies four key difficulties with the current mainstream approach of relying on the impact of a carbon price in the present liberalised electricity market, supplemented with additional incentive mechanisms like renewable obligation certificates and feed-in tariffs. We then summarise alternate mechanisms and propose a new approach, aimed at harnessing the potential interest and capital of electricity consumers, large and small, directly in funding low carbon electricity investments, in the form of longterm ‘Green Power’ contracts that operate in a separate, differentiated contract market.

Suggested Citation

  • Laing, T. & Grubb, M., 2010. "Low Carbon Electricity Investment: The Limitations of Traditional Approaches and a Radical Alternative," Cambridge Working Papers in Economics 1057, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1057
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    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1057.pdf
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    Cited by:

    1. Wolfgang Buchholz & Jonas Frank & Hans-Dieter Karl & Johannes Pfeiffer & Karen Pittel & Ursula Triebswetter & Jochen Habermann & Wolfgang Mauch & Thomas Staudacher, 2012. "Die Zukunft der Energiemärkte: Ökonomische Analyse und Bewertung von Potenzialen und Handlungsmöglichkeiten," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 57, October.
    2. Krahé, Max & Heidug, Wolf & Ward, John & Smale, Robin, 2013. "From demonstration to deployment: An economic analysis of support policies for carbon capture and storage," Energy Policy, Elsevier, vol. 60(C), pages 753-763.

    More about this item

    Keywords

    Electricity; Renewables; Climate Change; Green Power;

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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