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Policies for decarbonizing a liberalized power sector

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  • Newbery, David M G

Abstract

Given the agreed urgency of decarbonizing electricity and the need to guide decentralized private decisions, an adequate and credible carbon price appears essential. The paper defines and quantifies the useful concept of the break-even carbon price for mature zero-carbon electricity investments. It appears an attractive alternative given the difficulty of measuring the social cost of carbon, but modelling shows it extremely sensitive to projected fuel prices, the rate of interest, and the capital cost of generation options, all of which are very uncertain. This has important implications, and justifies combining a carbon price floor with suitable long-term contracts for electricity investments.

Suggested Citation

  • Newbery, David M G, 2018. "Policies for decarbonizing a liberalized power sector," CEPR Discussion Papers 12647, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12647
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    References listed on IDEAS

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    Cited by:

    1. Osorio, Sebastian & Pietzcker, Robert Carl & Pahle, Michael & Edenhofer, Ottmar, 2018. "How to deal with the risks of phasing out coal in Germany through national carbon pricing," EconStor Preprints 190771, ZBW - Leibniz Information Centre for Economics.
    2. repec:eee:appene:v:206:y:2017:i:c:p:815-828 is not listed on IDEAS

    More about this item

    Keywords

    carbon price; electricity; investment; renewables;

    JEL classification:

    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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