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Policies for decarbonizing a liberalized power sector

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  • Newbery, David

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.

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  • Newbery, David, 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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    3. Iwona Bąk & Anna Spoz & Magdalena Zioło & Marek Dylewski, 2021. "Dynamic Analysis of the Similarity of Objects in Research on the Use of Renewable Energy Resources in European Union Countries," Energies, MDPI, vol. 14(13), pages 1-24, July.
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    5. Appel, Benjamin J & Croco, Sarah E, 2024. "Democratic Backsliding and Foreign Policy," Institute on Global Conflict and Cooperation, Working Paper Series qt8s31h6c9, Institute on Global Conflict and Cooperation, University of California.
    6. Józef Paska & Tomasz Surma & Paweł Terlikowski & Krzysztof Zagrajek, 2020. "Electricity Generation from Renewable Energy Sources in Poland as a Part of Commitment to the Polish and EU Energy Policy," Energies, MDPI, vol. 13(16), pages 1-31, August.
    7. 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.
    8. Newbery, David M., 2016. "Towards a green energy economy? The EU Energy Union’s transition to a low-carbon zero subsidy electricity system – Lessons from the UK’s Electricity Market Reform," Applied Energy, Elsevier, vol. 179(C), pages 1321-1330.
    9. 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.
    10. Neuhoff, Karsten & May, Nils & Richstein, Jörn C., 2022. "Financing renewables in the age of falling technology costs," Resource and Energy Economics, Elsevier, vol. 70(C).
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    More about this item

    Keywords

    Carbon price; Electricity; investment; Renewables;
    All these keywords.

    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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