IDEAS home Printed from https://ideas.repec.org/a/eee/ecolec/v210y2023ics0921800923001180.html
   My bibliography  Save this article

An energy system model to study the impact of combining carbon pricing with direct support for renewable gases

Author

Listed:
  • Roach, Martin
  • Meeus, Leonardo

Abstract

The REPowerEU plan sets ambitious targets for biomethane and renewable hydrogen production in the European Union. Energy system models are needed to assist policymakers in designing energy policies that combine carbon pricing with direct support for renewable gases. This paper advances a stylized long-term equilibrium model in which competing fossil-based and renewable technologies serve final electricity, heating, and hydrogen demand. First, we analyze under which conditions renewable gases – biomethane and renewable hydrogen – are cost-competitive with carbon pricing and what determines the incremental cost to support them with direct subsidies when they are not. Second, interaction effects between carbon pricing and renewable hydrogen and biomethane production targets are investigated. When renewable gases are not cost-competitive and direct support is still required to reach the renewable gas production target, the incremental cost to support them are shaped by significant interaction effects between policies. The main conclusion is that policymakers should be aware of these interaction effects when they design renewable gas policies to avoid surprises regarding the substitutability between energy policies, the incremental costs implied by them, and their collective impact on renewable energy production.

Suggested Citation

  • Roach, Martin & Meeus, Leonardo, 2023. "An energy system model to study the impact of combining carbon pricing with direct support for renewable gases," Ecological Economics, Elsevier, vol. 210(C).
    • Handle: RePEc:eee:ecolec:v:210:y:2023:i:c:s0921800923001180
    DOI: 10.1016/j.ecolecon.2023.107855
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0921800923001180
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ecolecon.2023.107855?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Li, Xinyu & Mulder, Machiel, 2021. "Value of power-to-gas as a flexibility option in integrated electricity and hydrogen markets," Applied Energy, Elsevier, vol. 304(C).
    2. Patteeuw, Dieter & Reynders, Glenn & Bruninx, Kenneth & Protopapadaki, Christina & Delarue, Erik & D’haeseleer, William & Saelens, Dirk & Helsen, Lieve, 2015. "CO2-abatement cost of residential heat pumps with active demand response: demand- and supply-side effects," Applied Energy, Elsevier, vol. 156(C), pages 490-501.
    3. Lecuyer, Oskar & Quirion, Philippe, 2013. "Can uncertainty justify overlapping policy instruments to mitigate emissions?," Ecological Economics, Elsevier, vol. 93(C), pages 177-191.
    4. De Jonghe, Cedric & Delarue, Erik & Belmans, Ronnie & D'haeseleer, William, 2009. "Interactions between measures for the support of electricity from renewable energy sources and CO2 mitigation," Energy Policy, Elsevier, vol. 37(11), pages 4743-4752, November.
    5. Lehmann, Paul & Gawel, Erik, 2013. "Why should support schemes for renewable electricity complement the EU emissions trading scheme?," Energy Policy, Elsevier, vol. 52(C), pages 597-607.
    6. Eirik S. Amundsen and Torstein Bye, 2018. "Simultaneous use of black, green, and white certificate systems," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    7. Schlund, David & Schönfisch, Max, 2021. "Analysing the impact of a renewable hydrogen quota on the European electricity and natural gas markets," Applied Energy, Elsevier, vol. 304(C).
    8. Ruhnau, Oliver, 2022. "How flexible electricity demand stabilizes wind and solar market values: The case of hydrogen electrolyzers," Applied Energy, Elsevier, vol. 307(C).
    9. Koirala, Binod & Hers, Sebastiaan & Morales-España, Germán & Özdemir, Özge & Sijm, Jos & Weeda, Marcel, 2021. "Integrated electricity, hydrogen and methane system modelling framework: Application to the Dutch Infrastructure Outlook 2050," Applied Energy, Elsevier, vol. 289(C).
    10. Newbery, David, 2018. "Evaluating the case for supporting renewable electricity," Energy Policy, Elsevier, vol. 120(C), pages 684-696.
    11. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2005. "A tale of two market failures: Technology and environmental policy," Ecological Economics, Elsevier, vol. 54(2-3), pages 164-174, August.
    12. Meus, Jelle & De Vits, Sarah & S'heeren, Nele & Delarue, Erik & Proost, Stef, 2021. "Renewable electricity support in perfect markets: Economic incentives under diverse subsidy instruments," Energy Economics, Elsevier, vol. 94(C).
    13. Weigt, Hannes & Ellerman, Denny & Delarue, Erik, 2013. "CO2 abatement from renewables in the German electricity sector: Does a CO2 price help?," Energy Economics, Elsevier, vol. 40(S1), pages 149-158.
    14. Schlund, David & Schönfisch, Max, 2021. "Analysing the Impact of a Renewable Hydrogen Quota on the European Electricity and Natural Gas Markets," EWI Working Papers 2021-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    15. Shirizadeh, Behrang & Quirion, Philippe, 2022. "The importance of renewable gas in achieving carbon-neutrality: Insights from an energy system optimization model," Energy, Elsevier, vol. 255(C).
    16. Roach, Martin & Meeus, Leonardo, 2020. "The welfare and price effects of sector coupling with power-to-gas," Energy Economics, Elsevier, vol. 86(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Su, Q. & Zhou, P. & Ding, H. & Xydis, G., 2024. "Transition towards a hybrid energy system: Combined effects of renewable portfolio standards and carbon emission trading," Energy Economics, Elsevier, vol. 135(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christoph Loschan & Daniel Schwabeneder & Matthias Maldet & Georg Lettner & Hans Auer, 2023. "Hydrogen as Short-Term Flexibility and Seasonal Storage in a Sector-Coupled Electricity Market," Energies, MDPI, vol. 16(14), pages 1-35, July.
    2. Paul Lehmann & Jos Sijm & Erik Gawel & Sebastian Strunz & Unnada Chewpreecha & Jean-Francois Mercure & Hector Pollitt, 2019. "Addressing multiple externalities from electricity generation: a case for EU renewable energy policy beyond 2020?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 21(2), pages 255-283, April.
    3. Schlund, David & Theile, Philipp, 2022. "Simultaneity of green energy and hydrogen production: Analysing the dispatch of a grid-connected electrolyser," Energy Policy, Elsevier, vol. 166(C).
    4. Megy, Camille & Massol, Olivier, 2023. "Is Power-to-Gas always beneficial? The implications of ownership structure," Energy Economics, Elsevier, vol. 128(C).
    5. Yuan, Yi & Ding, Tao & Chang, Xinyue & Jia, Wenhao & Xue, Yixun, 2024. "A distributed multi-objective optimization method for scheduling of integrated electricity and hydrogen systems," Applied Energy, Elsevier, vol. 355(C).
    6. Benoît Chèze, Julien Chevallier, Nicolas Berghmans, and Emilie Alberola, 2020. "On the CO2 Emissions Determinants During the EU ETS Phases I and II: A Plant-level Analysis Merging the EUTL and Platts Power Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 153-184.
    7. Bucksteeg, Michael & Mikurda, Jennifer & Weber, Christoph, 2023. "Integration of power-to-gas into electricity markets during the ramp-up phase—Assessing the role of carbon pricing," Energy Economics, Elsevier, vol. 124(C).
    8. Koch, Nicolas & Fuss, Sabine & Grosjean, Godefroy & Edenhofer, Ottmar, 2014. "Causes of the EU ETS price drop: Recession, CDM, renewable policies or a bit of everything?—New evidence," Energy Policy, Elsevier, vol. 73(C), pages 676-685.
    9. Delarue, Erik & Van den Bergh, Kenneth, 2016. "Carbon mitigation in the electric power sector under cap-and-trade and renewables policies," Energy Policy, Elsevier, vol. 92(C), pages 34-44.
    10. Anke, Carl-Philipp & Hobbie, Hannes & Schreiber, Steffi & Möst, Dominik, 2020. "Coal phase-outs and carbon prices: Interactions between EU emission trading and national carbon mitigation policies," Energy Policy, Elsevier, vol. 144(C).
    11. Zhang, Jiekuan, 2023. "Emissions trading scheme and energy consumption and output structure: Evidence from China," Renewable Energy, Elsevier, vol. 219(P1).
    12. Melliger, Marc, 2023. "Quantifying technology skewness in European multi-technology auctions and the effect of design elements and other driving factors," Energy Policy, Elsevier, vol. 175(C).
    13. Frédéric Branger & Oskar Lecuyer & Philippe Quirion, 2015. "The European Union Emissions Trading Scheme: should we throw the flagship out with the bathwater?," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 6(1), pages 9-16, January.
    14. Samuel Fankhauser & Cameron Hepburn & Jisung Park, 2010. "Combining Multiple Climate Policy Instruments: How Not To Do It," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 1(03), pages 209-225.
    15. Frédéric Branger & Oskar Lecuyer & Philippe Quirion, 2013. "The European Union Emissions Trading System : should we throw the flagship out with the bathwater ?," Working Papers hal-00866408, HAL.
    16. Andrea Bigano & Aleksander Śniegocki & Jacopo Zotti, 2016. "Policies for a More Dematerialized EU Economy. Theoretical Underpinnings, Political Context and Expected Feasibility," Sustainability, MDPI, vol. 8(8), pages 1-22, July.
    17. Zeng, Yingying, 2017. "Indirect double regulation and the carbon ETSs linking: The case of coal-fired generation in the EU and China," Energy Policy, Elsevier, vol. 111(C), pages 268-280.
    18. Grafström, Jonas, 2021. "Ratio Working Paper No. 351: Knowledge Spillovers in the Solar energy sector," Ratio Working Papers 351, The Ratio Institute.
    19. Sijm, Jos & Lehmann, Paul & Chewpreecha, Unnada & Gawel, Erik & Mercure, Jean-Francois & Pollitt, Hector & Strunz, Sebastian, 2014. "EU climate and energy policy beyond 2020: Are additional targets and instruments for renewables economically reasonable?," UFZ Discussion Papers 3/2014, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    20. Brigitte Knopf & Nicolas Koch & Godefroy Grosjean & Sabine Fuss & Christian Flachsland & Michael Pahle & Michael Jakob & Ottmar Edenhofer, 2014. "The European Emissions Trading System (EU ETS): Ex-Post Analysis, the Market Stability Reserve and Options for a Comprehensive Reform," Working Papers 2014.79, Fondazione Eni Enrico Mattei.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:210:y:2023:i:c:s0921800923001180. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolecon .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.