What does Europe pay for clean energy?—Review of macroeconomic simulation studies

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp07019.pdf Non-technical SummaryEnergy conversion and use are major sources of environmental pollution. Emissions from transport or from burning fossil fuels to produce electricity contribute substantially to global warming and other environmental problems. In line with the economic theory of externalities, several environmental policy measures try to reduce emissions from energy use by influencing the costs of energy consumption. The most important environmental policies in European energy markets are the European emissions trading scheme (EU ETS), energy taxes, subsidies for renewable energy sources, and instruments specifically targeted at the transport sector.A price increase of energy as an input increases production costs. This reduces the domestic and foreign demand for goods and services and, therefore, creates macroeconomic costs. Our paper presents a survey on selected studies on macroeconomic costs of environmental regulation in European energy markets. As some policy measures are initiated on the national level we also include experiences of single Member States, especially Germany.The analysed studies show that the environmental regulation affects the European economy, particularly the energy intensive industries and the industries that produce internationally tradable goods. From a macroeconomic point of view, however, the costs appear to be relatively small. The reason for that is that some sectors benefit from the regulation. If, for example, the regulation creates government revenues which are used to lower non-wage labour costs, this may benefit the labour intensive sectors, such as services. Not surprisingly, macroeconomic costs tend to be higher for more ambitious environmental targets. In this case, also the efficiency of the regulation becomes a more important issue. There are numerous studies on the macroeconomic costs of the EU ETS. Here, the costs depend not only on the assignment of reduction obligations to the sectors participating in the EU ETS but also on the optimal allocation of emission permits between the sectors participating in the ETS and the

Shale gas vs. coal: Policy implications from environmental impact comparisons of shale gas, conventional gas, and coal on air, water, and land in the United States

“…Prices of pollution can then create incentives to move towards cleaner goods. The trajectories to change include the modification of the production mix, therefore altering the amount of electricity produced by gas fired generators; the investment in abatement technologies, to level the emissions from coal and gas; and the overall reduction in electricity production, a policy oriented towards improving demand side mechanisms to accommodate the available production (Dannenberg et al, 2008). Additionally, a cap-and-trade policy can generate revenues, in case the permits are auctioned to the firms that will engage in this market.…”

Selecting Tools for Renewable Energy Analysis in Developing Countries: An Expanded Review

“…Around 176 countries have stated their renewable energy targets, driven by various motivations (REN21, 2017). Renewable energy technologies are regarded as one of the pathways to decarbonize the energy sector and to reduce fossil fuel dependency (Dannenberg et al, 2008;Taylor et al, 2014;Ozcan, 2017). Traditionally, renewable energy plays a vital role as an energy source in rural areas of developing countries (Blum et al, 2013;Sovacool, 2013).…”

“…Developed countries pull renewable energy investments by policy instruments, such as feed-in tariff (FIT) and a carbon tax to fossil fuel (Dannenberg et al, 2008). In the contrary, such cost increasing policies cannot be easily implemented in many developing countries, which usually have been overburdened from subsidizing fossil energy (Zyadin et al, 2014).…”

Modeling and Simulation of Energy Systems: A Review

“…Advantages of top-down models include the ability to consistently take into account the entire economy, while their disadvantages include generalized results without much explaining power, inadequate accounting of technological progress, and insufficient detail at smaller scales as a result of using highly aggregated empirical data [285]. Details on the top-down modeling approach are presented in a review by Dannenberg et al [286]. Top-down models can be divided into input-output models and equilibrium models as discussed next.…”