Innovative energy technologies and climate policy in Germany

Due to the size and structure of its economy, Germany is one of the largest carbon emitters in the European Union. Substantial mitigation possibilities exist in the electricity generation sector through advanced generating technologies or substitution of less carbon-intensive fuels. Various climate policies are considered to reduce emissions and enhance the share of climate friendly technologies. At the same time, Germany is facing a major renewal and restructuring process in the energy sector. Within the next two decades up to 50% of the current electricity generation capacity is likely to retire because of end of plant lifetime and the nuclear phase-out pact of 1998. This may provide a window of opportunity for new and innovative technologies to play an even more substantial role in the future electricity mix. Those new technologies and their role within a future German electricity system are the focus of this paper. We introduce advanced electricity technologies such as integrated gasification combined cycle (IGCC), natural gas combined cycle (NGCC), wind power, and CO2 capture and storage into a computable general equilibrium model for Germany, the Second Generation Model (SGM). We simulate the response of greenhouse gas emissions in Germany to various technology and carbon policy assumptions over the next few decades. This provides an estimate of the cost of meeting an emissions target, such as that from the Kyoto Protocol, and the share of emissions reductions available from the electricity generation sector.