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The Optimal Energy Mix in Power Generation and the Contribution from Natural Gas in Reducing Carbon Emissions to 2030 and Beyond

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  • Carraro, Carlo
  • Longden, Thomas
  • Marangoni, Giacomo
  • Tavoni, Massimo

Abstract

This paper analyses a set of new scenarios for energy markets in Europe to evaluate the consistency of economic incentives and climate objectives. It focuses in particular on the role of natural gas across a range of climate policy scenarios (including the Copenhagen Pledges and the EU Roadmap) to identify whether current trend and policies are leading to an economically efficient and, at the same time, climate friendly, energy mix. Economic costs and environmental objectives are balanced to identify the welfare-maximising development path, the related investment strategies in the energy sector, and the resulting optimal energy mix. Policy measures to support this balanced economic development are identified. A specific sensitivity analysis upon the role of the 2020 renewable targets and increased energy efficiency improvements is also carried out. We conclude that a suitable and sustained carbon price needs to be implemented to move energy markets in Europe closer to the optimal energy mix. We also highlight that an appropriate carbon pricing is sufficient to achieve both the emission target and the renewable target, without incurring in high economic costs if climate policy is not too ambitious and/or it is internationally coordinated. Finally, our results show that natural gas is the key transitional fuel within the cost-effective achievement of a range of climate policy targets.

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  • Carraro, Carlo & Longden, Thomas & Marangoni, Giacomo & Tavoni, Massimo, 2013. "The Optimal Energy Mix in Power Generation and the Contribution from Natural Gas in Reducing Carbon Emissions to 2030 and Beyond," CEPR Discussion Papers 9715, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9715
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    1. Brigitte Knopf & Yen-Heng Henry Chen & Enrica De Cian & Hannah Förster & Amit Kanudia & Ioanna Karkatsouli & Ilkka Keppo & Tiina Koljonen & Katja Schumacher & Detlef P. Van Vuuren, 2013. "Beyond 2020 — Strategies And Costs For Transforming The European Energy System," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 4(supp0), pages 1-38.
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    3. Francesco Bosello & Lorenza Campagnolo & Carlo Carraro & Fabio Eboli & Ramiro Parrado & Elisa Portale, 2013. "Macroeconomic Impacts of the EU 30% GHG Mitigation Target," Working Papers 2013.28, Fondazione Eni Enrico Mattei.
    4. Böhringer, Christoph & Rutherford, Thomas F. & Tol, Richard S. J., 2009. "The EU 20/20/2020 Targets: An Overview of the EMF22 Assessment," Papers WP325, Economic and Social Research Institute (ESRI).
    5. Hoogwijk, Monique & van Vuuren, Detlef & de Vries, Bert & Turkenburg, Wim, 2007. "Exploring the impact on cost and electricity production of high penetration levels of intermittent electricity in OECD Europe and the USA, results for wind energy," Energy, Elsevier, vol. 32(8), pages 1381-1402.
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    Cited by:

    1. Kim, Dowon & Ryu, Heelang & Lee, Jiwoong & Kim, Kyoung-Kuk, 2022. "Balancing risk: Generation expansion planning under climate mitigation scenarios," European Journal of Operational Research, Elsevier, vol. 297(2), pages 665-679.
    2. Gaspari, Michele & Lorenzoni, Arturo, 2018. "The governance for distributed energy resources in the Italian electricity market: A driver for innovation?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 82(P3), pages 3623-3632.

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    More about this item

    Keywords

    Carbon Pricing; Energy Markets; EU Climate Policy; Gas Share; Renewables Target;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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