IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v127y2019icp404-411.html
   My bibliography  Save this article

De-risking policies as a substantial determinant of climate change mitigation costs in developing countries: Case study of the Middle East and North African region

Author

Listed:
  • Komendantova, Nadejda
  • Schinko, Thomas
  • Patt, Anthony

Abstract

Ambitious goals for climate change mitigation and energy security policies are driving deployment of renewable energy sources globally. However, the deployment of renewable energies at scale requires not only public but also private capital, such as foreign direct investment (FDI). Many countries with favourable conditions for renewables, such as the countries of the Middle East and North African (MENA) region, are not attracting sufficient FDI. Risk perceptions of FDI stakeholders are one of the reasons. This paper discusses the de-risking approach as a possible tool to address subjective risk perceptions and assesses with a Computable General Equilibrium (CGE) model macroeconomic feedback-effects of employing a de-risking strategy for FDI into a particular kind of renewable electricity (RES-E) technology, concentrated solar power, in the MENA region. Our results show that the application of a de-risking approach reduces the costs for deployment of CSP, and therefore, also volumes of subsidies that would be needed to make CSP cost competitive with fossil fuel based electricity generation. This, in turn, leads to positive GDP and welfare effects in the MENA region. Our results allow us developing of recommendations for energy policy the implementation of the de-risking approach as a potential consensual option with high political feasibility to reduce climate change mitigation costs.

Suggested Citation

  • Komendantova, Nadejda & Schinko, Thomas & Patt, Anthony, 2019. "De-risking policies as a substantial determinant of climate change mitigation costs in developing countries: Case study of the Middle East and North African region," Energy Policy, Elsevier, vol. 127(C), pages 404-411.
    • Handle: RePEc:eee:enepol:v:127:y:2019:i:c:p:404-411
    DOI: 10.1016/j.enpol.2018.12.023
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S030142151830822X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2018.12.023?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. del Rio, Pablo & Gual, Miguel A., 2007. "An integrated assessment of the feed-in tariff system in Spain," Energy Policy, Elsevier, vol. 35(2), pages 994-1012, February.
    2. Komendantova, Nadejda & Patt, Anthony & Barras, Lucile & Battaglini, Antonella, 2012. "Perception of risks in renewable energy projects: The case of concentrated solar power in North Africa," Energy Policy, Elsevier, vol. 40(C), pages 103-109.
    3. Tobias S. Schmidt, 2014. "Low-carbon investment risks and de-risking," Nature Climate Change, Nature, vol. 4(4), pages 237-239, April.
    4. Williges, Keith & Lilliestam, Johan & Patt, Anthony, 2010. "Making concentrated solar power competitive with coal: The costs of a European feed-in tariff," Energy Policy, Elsevier, vol. 38(6), pages 3089-3097, June.
    5. Bednar-Friedl, Birgit & Schinko, Thomas & Steininger, Karl W., 2012. "The relevance of process emissions for carbon leakage: A comparison of unilateral climate policy options with and without border carbon adjustment," Energy Economics, Elsevier, vol. 34(S2), pages 168-180.
    6. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Springer;Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
    7. Schinko, Thomas & Bednar-Friedl, Birgit & Steininger, Karl W. & Grossmann, Wolf D., 2014. "Switching to carbon-free production processes: Implications for carbon leakage and border carbon adjustment," Energy Policy, Elsevier, vol. 67(C), pages 818-831.
    8. Mason, Michael & Kumetat, Dennis, 2011. "At the crossroads: Energy futures for North Africa," Energy Policy, Elsevier, vol. 39(8), pages 4407-4410, August.
    9. Komendantova, Nadejda & Patt, Anthony & Williges, Keith, 2011. "Solar power investment in North Africa: Reducing perceived risks," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4829-4835.
    10. Ondraczek, Janosch & Komendantova, Nadejda & Patt, Anthony, 2015. "WACC the dog: The effect of financing costs on the levelized cost of solar PV power," Renewable Energy, Elsevier, vol. 75(C), pages 888-898.
    11. Schinko, Thomas & Komendantova, Nadejda, 2016. "De-risking investment into concentrated solar power in North Africa: Impacts on the costs of electricity generation," Renewable Energy, Elsevier, vol. 92(C), pages 262-272.
    12. Frisari, Gianleo & Stadelmann, Martin, 2015. "De-risking concentrated solar power in emerging markets: The role of policies and international finance institutions," Energy Policy, Elsevier, vol. 82(C), pages 12-22.
    13. Ferris, Michael C. & Munson, Todd S., 2000. "Complementarity problems in GAMS and the PATH solver," Journal of Economic Dynamics and Control, Elsevier, vol. 24(2), pages 165-188, February.
    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. Đukan, Mak & Kitzing, Lena, 2023. "A bigger bang for the buck: The impact of risk reduction on renewable energy support payments in Europe," Energy Policy, Elsevier, vol. 173(C).
    2. Amin, Sakib & Jamasb, Tooraj & Llorca, Manuel & Marsiliani, Laura & Renström, Thomas I., 2022. "Decarbonisation policies and energy price reforms in Bangladesh," Energy Policy, Elsevier, vol. 170(C).
    3. Gargallo, Pilar & Lample, Luis & Miguel, Jesús & Salvador, Manuel, 2022. "Dynamic comparison of portfolio risk: Clean vs dirty energy," Finance Research Letters, Elsevier, vol. 47(PA).
    4. Naeem, Muhammad Abubakr & Sadorsky, Perry & Karim, Sitara, 2023. "Sailing across climate-friendly bonds and clean energy stocks: An asymmetric analysis with the Gulf Cooperation Council Stock markets," Energy Economics, Elsevier, vol. 126(C).
    5. Nadejda Komendantova & Leena Marashdeh & Love Ekenberg & Mats Danielson & Franziska Dettner & Simon Hilpert & Clemens Wingenbach & Kholoud Hassouneh & Ahmed Al-Salaymeh, 2020. "Water–Energy Nexus: Addressing Stakeholder Preferences in Jordan," Sustainability, MDPI, vol. 12(15), pages 1-16, July.
    6. Đukan, Mak & Kitzing, Lena, 2021. "The impact of auctions on financing conditions and cost of capital for wind energy projects," Energy Policy, Elsevier, vol. 152(C).
    7. Varela Soares, Ian & Mauger, Romain & Santos, Thauan, 2023. "Considerations for benefit stacking policies in the EU electricity storage market," Energy Policy, Elsevier, vol. 172(C).
    8. Farhad Taghizadeh-Hesary & Naoyuki Yoshino & Han Phoumin, 2021. "Analyzing the Characteristics of Green Bond Markets to Facilitate Green Finance in the Post-COVID-19 World," Sustainability, MDPI, vol. 13(10), pages 1-24, May.
    9. Egli, Florian, 2020. "Renewable energy investment risk: An investigation of changes over time and the underlying drivers," Energy Policy, Elsevier, vol. 140(C).
    10. Friedemann Polzin & Mark Sanders & Bjarne Steffen & Florian Egli & Tobias S. Schmidt & Panagiotis Karkatsoulis & Panagiotis Fragkos & Leonidas Paroussos, 2021. "The effect of differentiating costs of capital by country and technology on the European energy transition," Climatic Change, Springer, vol. 167(1), pages 1-21, July.
    11. Hwang, Haejin & Kim, Sunghoon & García, Álvaro González & Kim, Jiyong, 2021. "Global sensitivity analysis for assessing the economic feasibility of renewable energy systems for an off-grid electrified city," Energy, Elsevier, vol. 216(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. Schinko, Thomas & Komendantova, Nadejda, 2016. "De-risking investment into concentrated solar power in North Africa: Impacts on the costs of electricity generation," Renewable Energy, Elsevier, vol. 92(C), pages 262-272.
    2. George A. Gonzalez, 2016. "Transforming Energy: Solving Climate Change with Technology Policy . New York : Cambridge University Press . 360 pages. ISBN 9781107614970, $29.99 paperback. Anthony Patt , 2015 ," Review of Policy Research, Policy Studies Organization, vol. 33(1), pages 111-113, January.
    3. Egli, Florian, 2020. "Renewable energy investment risk: An investigation of changes over time and the underlying drivers," Energy Policy, Elsevier, vol. 140(C).
    4. Damien Bazin & Nouri Chtourou & Amna Omri, 2019. "Risk management and policy implications for concentrating solar power technology investments in Tunisia," Post-Print hal-02061788, HAL.
    5. Sweerts, Bart & Longa, Francesco Dalla & van der Zwaan, Bob, 2019. "Financial de-risking to unlock Africa's renewable energy potential," Renewable and Sustainable Energy Reviews, Elsevier, vol. 102(C), pages 75-82.
    6. Schwerhoff, Gregor & Sy, Mouhamadou, 2017. "Financing renewable energy in Africa – Key challenge of the sustainable development goals," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 393-401.
    7. Backhaus, Klaus & Gausling, Philipp & Hildebrand, Luise, 2015. "Comparing the incomparable: Lessons to be learned from models evaluating the feasibility of Desertec," Energy, Elsevier, vol. 82(C), pages 905-913.
    8. Battaglini, Antonella & Komendantova, Nadejda & Brtnik, Patricia & Patt, Anthony, 2012. "Perception of barriers for expansion of electricity grids in the European Union," Energy Policy, Elsevier, vol. 47(C), pages 254-259.
    9. Zhao, Zhen-Yu & Chen, Yu-Long & Thomson, John Douglas, 2017. "Levelized cost of energy modeling for concentrated solar power projects: A China study," Energy, Elsevier, vol. 120(C), pages 117-127.
    10. Briera, Thibault & Lefèvre, Julien, 2024. "Reducing the cost of capital through international climate finance to accelerate the renewable energy transition in developing countries," Energy Policy, Elsevier, vol. 188(C).
    11. Ogunmodimu, Olumide & Okoroigwe, Edmund C., 2019. "Solar thermal electricity in Nigeria: Prospects and challenges," Energy Policy, Elsevier, vol. 128(C), pages 440-448.
    12. Labordena, Mercè & Patt, Anthony & Bazilian, Morgan & Howells, Mark & Lilliestam, Johan, 2017. "Impact of political and economic barriers for concentrating solar power in Sub-Saharan Africa," Energy Policy, Elsevier, vol. 102(C), pages 52-72.
    13. Friedemann Polzin & Mark Sanders & Bjarne Steffen & Florian Egli & Tobias S. Schmidt & Panagiotis Karkatsoulis & Panagiotis Fragkos & Leonidas Paroussos, 2021. "The effect of differentiating costs of capital by country and technology on the European energy transition," Climatic Change, Springer, vol. 167(1), pages 1-21, July.
    14. Đukan, Mak & Kitzing, Lena, 2021. "The impact of auctions on financing conditions and cost of capital for wind energy projects," Energy Policy, Elsevier, vol. 152(C).
    15. Malhotra, Abhishek & Schmidt, Tobias S. & Haelg, Leonore & Waissbein, Oliver, 2017. "Scaling up finance for off-grid renewable energy: The role of aggregation and spatial diversification in derisking investments in mini-grids for rural electrification in India," Energy Policy, Elsevier, vol. 108(C), pages 657-672.
    16. Oliver Schenker & Simon Koesler & Andreas Löschel, 2018. "On the effects of unilateral environmental policy on offshoring in multi‐stage production processes," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(4), pages 1221-1256, November.
    17. Komendantova, Nadejda & Patt, Anthony, 2014. "Employment under vertical and horizontal transfer of concentrated solar power technology to North African countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 40(C), pages 1192-1201.
    18. Fæhn, Taran & Yonezawa, Hidemichi, 2021. "Emission targets and coalition options for a small, ambitious country: An analysis of welfare costs and distributional impacts for Norway," Energy Economics, Elsevier, vol. 103(C).
    19. Escribano Francés, Gonzalo & Marín-Quemada, José María & San Martín González, Enrique, 2013. "RES and risk: Renewable energy's contribution to energy security. A portfolio-based approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 26(C), pages 549-559.
    20. Roman Lokhov & Heinz Welsch, 2008. "Emissions trading between Russia and the European Union: a CGE analysis of potentials and impacts," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 9(1), pages 1-23, March.

    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:enepol:v:127:y:2019:i:c:p:404-411. 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/enpol .

    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.