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Europe Beyond Coal – An Economic and Climate Impact Assessment

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  • Böhringer, Christoph

    () (Department of Business Administration, Economics and Law, University of Oldenburg)

  • Rosendahl, Knut Einar

    () (School of Economics and Business, Norwegian University of Life Sciences)

Abstract

Several European countries have decided to phase out coal power generation. Emissions from electricity generation are already regulated by the EU Emissions Trading System (ETS), and in some countries like Germany the phaseout of coal will be accompanied with cancellation of emissions allowances. In this paper we examine the consequences of phasing out coal, both for the broader economy, the electricity sector, and for CO2 emissions. We show analytically how the welfare impacts for a phaseout region depend on i) whether and how allowances are canceled, ii) whether other countries join phaseout policies, and iii) terms-of-trade effects in the ETS market. Based on numerical simulations with a computable general equilibrium model for the European economy, we quantify the economic and environmental impacts of alternative phaseout scenarios, considering both unilateral and multilateral phaseout. We find that terms-of-trade effects in the ETS market play an important role for the welfare effects across EU member states. For Germany, coal phaseout combined with unilateral cancellation of allowances is found to be welfare-improving if the German citizens value emissions reductions at 65 Euro per ton or more.

Suggested Citation

  • Böhringer, Christoph & Rosendahl, Knut Einar, 2020. "Europe Beyond Coal – An Economic and Climate Impact Assessment," Working Paper Series 5-2020, Norwegian University of Life Sciences, School of Economics and Business.
  • Handle: RePEc:hhs:nlsseb:2020_005
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    References listed on IDEAS

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    More about this item

    Keywords

    Coal phaseout; emissions trading; electricity market;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • F18 - International Economics - - Trade - - - Trade and Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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