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Quantifying CO2 abatement costs in the power sector

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  • Van den Bergh, Kenneth
  • Delarue, Erik

Abstract

CO2 cap-and-trade mechanisms and CO2 emission taxes are becoming increasingly widespread. To assess the impact of a CO2 price, marginal abatement cost curves (MACCs) are a commonly used tool by policy makers, providing a direct graphical link between a CO2 price and the expected abatement. However, such MACCs can suffer from issues related to robustness and granularity. This paper focuses on the relation between a CO2 emission cost and CO2 emission reductions in the power sector. The authors present a new methodology that improves the understanding of the relation between a CO2 cost and CO2 abatement. The methodology is based on the insight that CO2 emissions in the power sector are driven by the composition of the conventional power portfolio, the residual load and the generation costs of the conventional units. The methodology addresses both the robustness issue and the granularity issue related to MACCs. The methodology is based on a bottom-up approach, starting from engineering knowledge of the power sector. It offers policy makers a new tool to assess CO2 abatement options. The methodology is applied to the Central Western European power system and illustrates possible interaction effects between, e.g., fuel switching and renewables deployment.

Suggested Citation

  • Van den Bergh, Kenneth & Delarue, Erik, 2015. "Quantifying CO2 abatement costs in the power sector," Energy Policy, Elsevier, vol. 80(C), pages 88-97.
    • Handle: RePEc:eee:enepol:v:80:y:2015:i:c:p:88-97
    DOI: 10.1016/j.enpol.2015.01.034
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    References listed on IDEAS

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    3. 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.
    4. Richstein, Jörn C. & Chappin, Émile J.L. & de Vries, Laurens J., 2015. "The market (in-)stability reserve for EU carbon emission trading: Why it might fail and how to improve it," Utilities Policy, Elsevier, vol. 35(C), pages 1-18.
    5. Ortega-Izquierdo, Margarita & Río, Pablo del, 2020. "An analysis of the socioeconomic and environmental benefits of wind energy deployment in Europe," Renewable Energy, Elsevier, vol. 160(C), pages 1067-1080.
    6. Pedro M. S. Frade & João V. G. A. Vieira-Costa & Gerardo J. Osório & João J. E. Santana & João P. S. Catalão, 2018. "Influence of Wind Power on Intraday Electricity Spot Market: A Comparative Study Based on Real Data," Energies, MDPI, vol. 11(11), pages 1-19, November.
    7. Dai, Sheng & Zhou, Xun & Kuosmanen, Timo, 2020. "Forward-looking assessment of the GHG abatement cost: Application to China," Energy Economics, Elsevier, vol. 88(C).
    8. Jin-Feng Zhou & Juan Wu & Wei Chen & Dan Wu, 2022. "Carbon Emission Reduction Cost Assessment Using Multiregional Computable General Equilibrium Model: Guangdong–Hong Kong–Macao Greater Bay Area," Sustainability, MDPI, vol. 14(17), pages 1-26, August.
    9. Ahn, Young-Hwan & Jeon, Wooyoung, 2019. "Power sector reform and CO2 abatement costs in Korea," Energy Policy, Elsevier, vol. 131(C), pages 202-214.
    10. Misconel, Steffi & Prina, Matteo Giacomo & Hobbie, Hannes & Möst, Dominik & Sparber, Wolfram, 2022. "How to determine bottom-up model-derived marginal CO₂ abatement cost curves with high temporal, sectoral, and techno-economic resolution?," EconStor Preprints 260472, ZBW - Leibniz Information Centre for Economics.
    11. Jenny Gabriela Peña Balderrama & Thomas Alfstad & Constantinos Taliotis & Mohammad Reza Hesamzadeh & Mark Howells, 2018. "A Sketch of Bolivia’s Potential Low-Carbon Power System Configurations. The Case of Applying Carbon Taxation and Lowering Financing Costs," Energies, MDPI, vol. 11(10), pages 1-20, October.
    12. Woo, C.K. & Olson, A. & Chen, Y. & Moore, J. & Schlag, N. & Ong, A. & Ho, T., 2017. "Does California's CO2 price affect wholesale electricity prices in the Western U.S.A.?," Energy Policy, Elsevier, vol. 110(C), pages 9-19.
    13. Marion Leroutier, 2021. "Carbon Pricing and Power Sector Decarbonisation: Evidence from the UK," Working Papers halshs-03265636, HAL.
    14. Steve Dahlke, 2019. "Short Run Effects of Carbon Policy on U.S. Electricity Markets," Energies, MDPI, vol. 12(11), pages 1-21, June.
    15. 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.
    16. Marion Leroutier, 2021. "Carbon Pricing and Power Sector Decarbonisation: Evidence from the UK," CIRED Working Papers halshs-03265636, HAL.

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