CO2 Abatement from RES Injections in the German Electricity Sector: Does a CO2 Price Help?

36 Pages Posted: 11 Jun 2012

See all articles by Hannes Weigt

Hannes Weigt

WWZ, Wirtschaftswissenschaftliche Fakultät der Universität Basel

A. Denny Ellerman

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Erik Delarue

affiliation not provided to SSRN

Date Written: February 1, 2012

Abstract

The overlapping impact of the Emission Trading System (ETS) and renewable energy (RE) deployment targets creates a classic case of interaction effects. Whereas the price interaction is widely recognized and has been thoroughly discussed, the effect of an overlapping instrument on the abatement attributable to an instrument has gained little attention. This paper estimates the actual reduction in demand for European Union Allowances that has occurred due to RE deployment focusing on the German electricity sector, for the five years 2006 through 2010. Based on a unit commitment model we estimate that CO2 emissions from the electricity sector are reduced by 33 to 57 Mtons, or 10% to 16% of what estimated emissions would have been without any RE policy. Furthermore, we find that the abatement attributable to RE injections is greater in the presence of an allowance price than otherwise. The same holds for the ETS effect in presence of RE injection. This interaction effect is consistently positive for the German electricity system, at least for these years, and on the order of 0.5% to 1.5% of emissions.

Keywords: ETS, RE policy, interaction, emission abatement, Germany

JEL Classification: L94, Q58

Suggested Citation

Weigt, Hannes and Ellerman, A. Denny and Delarue, Erik, CO2 Abatement from RES Injections in the German Electricity Sector: Does a CO2 Price Help? (February 1, 2012). Available at SSRN: https://ssrn.com/abstract=2081698 or http://dx.doi.org/10.2139/ssrn.2081698

Hannes Weigt (Contact Author)

WWZ, Wirtschaftswissenschaftliche Fakultät der Universität Basel ( email )

Basel, 4051
Switzerland

HOME PAGE: http://fonew.unibas.ch/

A. Denny Ellerman

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Erik Delarue

affiliation not provided to SSRN ( email )

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