IDEAS home Printed from https://ideas.repec.org/p/ags/pugtwp/333070.html
   My bibliography  Save this paper

The European Emission Trading System and renewable electricity: Using the GTAP Power Database to analyze the role of carbon prices on the development of renewables in the EU

Author

Listed:
  • Soeder, Mareike
  • Thube, Sneha Dattatraya
  • Winkler, Malte

Abstract

About one half of European greenhouse gas (GHG) emissions is regulated under the EU emissions trading system (ETS), the other half is not subject to carbon pricing. Under increasing carbon prices this may lead to intersectoral carbon leakage, as some GHG emissions are burdened with a price and others are not. Furthermore, increasing carbon prices may lead to international leakage effects, shifts in electricity production technologies (fossil fuel vs. renewable) and inter-European burden sharing of GHG abatement. Here we use the computable general equilibrium (CGE) model DART-CLIM to analyze these effects under a set of scenarios reflecting different degrees of flexibility on the production and/or the consumption side. While in most non-ETS sectors emissions (and, thus, intersectoral carbon leakage) are highest in a scenario of restricted growth of renewable electricity, emissions in direct fossil fuel consumption increase in a scenario with high substitutability in energy goods in final household consumption. This is because electricity prices increase and coal and gas prices decrease due to strong reductions in coal and gas based electricity production following high prices for emission allowances in the EU-ETS. International carbon leakage increases with a higher allowance price, with China showing especially high emissions under the assumption of reduced renewable installation. In the EU´s electricity sector coal decreases by 75% when an allowance price of 50€ is assumed. When renewables are thwarted, mainly gas and oil increase their electricity production to fill the gap left by coal and renewables, but overall electricity production decreases. Our results indicate that a strong development of renewable electricity production is desirable to restrict intersectoral and international carbon leakage. Measures for household GHG emissions should be taken to avoid increasing emissions in this sector when fossil fuel prices decrease due to higher allowance prices.

Suggested Citation

  • Soeder, Mareike & Thube, Sneha Dattatraya & Winkler, Malte, 2019. "The European Emission Trading System and renewable electricity: Using the GTAP Power Database to analyze the role of carbon prices on the development of renewables in the EU," Conference papers 333070, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333070
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/333070/files/9304.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ralf Martin & Mirabelle Muûls & Ulrich J. Wagner, 2016. "The Impact of the European Union Emissions Trading Scheme on Regulated Firms: What Is the Evidence after Ten Years?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 10(1), pages 129-148.
    2. Klepper, Gernot & Peterson, Sonja, 2006. "Marginal abatement cost curves in general equilibrium: The influence of world energy prices," Resource and Energy Economics, Elsevier, vol. 28(1), pages 1-23, January.
    3. Springer, Katrin, 1998. "The DART general equilibrium model: A technical description," Kiel Working Papers 883, Kiel Institute for the World Economy (IfW Kiel).
    Full references (including those not matched with items on IDEAS)

    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. Abrell, Jan & Kosch, Mirjam & Rausch, Sebastian, 2022. "How effective is carbon pricing?—A machine learning approach to policy evaluation," Journal of Environmental Economics and Management, Elsevier, vol. 112(C).
    2. Ruth Delzeit & Malte Winkler & Mareike Söder, 2018. "Land Use Change under Biofuel Policies and a Tax on Meat and Dairy Products: Considering Complexity in Agricultural Production Chains Matters," Sustainability, MDPI, vol. 10(2), pages 1-25, February.
    3. Delzeit, Ruth & Heimann, Tobias & Schünemann, Franziska & Söder, Mareike, 2021. "Who benefits really from phasing out palmoil-based biodiesel in the EU?," Kiel Working Papers 2203, Kiel Institute for the World Economy (IfW Kiel).
    4. Heimann, Tobias & Delzeit, Ruth, 2024. "Land for fish: Quantifying the connection between the aquaculture sector and agricultural markets," Ecological Economics, Elsevier, vol. 217(C).
    5. Delzeit, Ruth & Heimann, Tobias & Schünemann, Franziska & Söder, Mareike, 2021. "DART-BIO: A technical description," Kiel Working Papers 2195, Kiel Institute for the World Economy (IfW Kiel).
    6. Chen Shi & Yujiao Xian & Zhixin Wang & Ke Wang, 2023. "Marginal abatement cost curve of carbon emissions in China: a functional data analysis," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 28(2), pages 1-25, February.
    7. John Foster & Liam Wagner & Phil Wild & Junhua Zhao & Lucas Skoofa & Craig Froome, 2011. "Market and Economic Modelling of the Intelligent Grid: End of Year Report 2009," Energy Economics and Management Group Working Papers 09, School of Economics, University of Queensland, Australia.
    8. Fang, Sheng & Lu, Xinsheng & Li, Jianfeng & Qu, Ling, 2018. "Multifractal detrended cross-correlation analysis of carbon emission allowance and stock returns," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 509(C), pages 551-566.
    9. Badau, Flavius & Färe, Rolf & Gopinath, Munisamy, 2016. "Global resilience to climate change: Examining global economic and environmental performance resulting from a global carbon dioxide market," Resource and Energy Economics, Elsevier, vol. 45(C), pages 46-64.
    10. Delarue, E.D. & Ellerman, A.D. & D'haeseleer, W.D., 2010. "Robust MACCs? The topography of abatement by fuel switching in the European power sector," Energy, Elsevier, vol. 35(3), pages 1465-1475.
    11. Argueyrolles, Robin & Delzeit, Ruth, 2022. "The interconnections between Fossil Fuel Subsidy Reforms and biofuels," Conference papers 333492, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    12. Löschel, Andreas & Lutz, Benjamin Johannes & Managi, Shunsuke, 2019. "The impacts of the EU ETS on efficiency and economic performance – An empirical analyses for German manufacturing firms," Resource and Energy Economics, Elsevier, vol. 56(C), pages 71-95.
    13. Lehmann, Paul, 2010. "Combining emissions trading and emissions taxes in a multi-objective world," UFZ Discussion Papers 4/2010, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    14. Zhou, X. & Fan, L.W. & Zhou, P., 2015. "Marginal CO2 abatement costs: Findings from alternative shadow price estimates for Shanghai industrial sectors," Energy Policy, Elsevier, vol. 77(C), pages 109-117.
    15. Du, Limin & Hanley, Aoife & Wei, Chu, 2015. "Estimating the Marginal Abatement Cost Curve of CO2 Emissions in China: Provincial Panel Data Analysis," Energy Economics, Elsevier, vol. 48(C), pages 217-229.
    16. Stuart Evans & Michael A. Mehling & Robert A. Ritz & Paul Sammon, 2021. "Border carbon adjustments and industrial competitiveness in a European Green Deal," Climate Policy, Taylor & Francis Journals, vol. 21(3), pages 307-317, March.
    17. Gernot Klepper & Sonja Peterson, 2005. "Trading Hot-Air. The Influence of Permit Allocation Rules, Market Power and the US Withdrawal from the Kyoto Protocol," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(2), pages 205-228, October.
    18. Johansson, R. & Meyer, S. & Whistance, J. & Thompson, W. & Debnath, D., 2020. "Greenhouse gas emission reduction and cost from the United States biofuels mandate," Renewable and Sustainable Energy Reviews, Elsevier, vol. 119(C).
    19. Johan Lilliestam & Anthony Patt & Germán Bersalli, 2022. "On the quality of emission reductions: observed effects of carbon pricing on investments, innovation, and operational shifts. A response to van den Bergh and Savin (2021)," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(3), pages 733-758, November.
    20. Martinsen, Dag & Krey, Volker & Markewitz, Peter, 2007. "Implications of high energy prices for energy system and emissions--The response from an energy model for Germany," Energy Policy, Elsevier, vol. 35(9), pages 4504-4515, September.

    More about this item

    Keywords

    International Relations/Trade;

    Statistics

    Access and download statistics

    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:ags:pugtwp:333070. 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gtpurus.html .

    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.