• Energy Research

Abstract Climate policy arrangements of partial regional coverage, as they seem to emerge from the UNFCCC process, might lead to carbon leakage and hence a broad literature has developed to quantify leakage. Most of these analyses, however, are confined to consider emissions from fuel combustion only. Yet, some of the most relevant simultaneously energy intensive and internationally trade exposed sectors are also subject to substantial emissions from industrial processes. Carbon dioxide emissions can be released in industrial processes which physically or chemically transform materials. In the steel and cement sectors, for example, these process emissions amount to about half of sector carbon dioxide emissions in many countries. We incorporate industrial process emissions based on UNFCCC data into a multi-sectoral multi-regional computable general equilibrium model and analyze the implications of a unilateral EU 20% carbon dioxide emission reduction policy on leakage and the effectiveness of border carbon adjustment in reducing leakage. By comparing the results to a model without process emissions, we find that leakage of climate policy so far has been underestimated. Leakage turns out to be higher when process emissions are correctly accounted for (38% instead of 29% for combustion emissions only). Conversely, border carbon adjustment measures are found to be roughly twice as effective to reduce leakage rates, when process emissions are correctly accounted for — as carbon adjustment rates are more directly targeted to the relevant sectors. Yet, border carbon adjustment measures should not be seen as a panacea as they might impede necessary technological carbon-free innovation, unless they are phased out over time.

Abstract Biomass action plans in many European countries seek to expand biomass heat and fuel supply, mainly to be supplied by peripheral, agricultural regions. We develop a two-plus-ten-region energy-focused computable general equilibrium (CGE) model that acknowledges land competition in analysing the sub-state local-regional economic implications of such a strategy, embedded within a global context. Our model is based on a full cost analysis of selected biomass technologies covering a range of agricultural and forestry crops, as well as thermal insulation. The local-regional macroeconomic effects differ significantly across technologies and are governed by factors such as net labour intensity in crop production. The high land intensity of agricultural biomass products crowds out conventional agriculture, and thus lowers employment and drives up land prices and the consumer price index. The regional economic results show that net employment effects are positive for all forestry based biomass energy, and also show for which agriculture based biomass systems this is true, even when accounting for land competition. When regional consumer price development governs regional wages or when the agricultural sector is in strong enough competition to the international market, positive employment and welfare impacts vanish fully for agriculture based bio-energy.

Several forms of renewable energy compete for supremacy or for an appropriate role in global energy supply. A form of renewable energy can only play an important role in global energy supply if it fulfills several basic requirements. Its capacity must allow supplying a considerable fraction of present and future energy demand, all materials for its production must be readily available, land demand must not be prohibitive, and prices must reach grid parity in the nearer future. Moreover, a renewable energy technology can only be acceptable if it is politically safe. We supply a collection of indicators which allow assessing competing forms of renewable energy and elucidate why surprise is still a major factor in this field, calling for adaptive management. Photovoltaics (PV) are used as an example of a renewable energy source that looks highly promising, possibly supplemented by solar thermal electricity production (ST). We also show why energy use will contribute to land use problems and discuss ways in which the right choice of renewables may be indispensible in solving these problems.

Abstract Seeking to limit global warming to 2 °C puts narrow restrictions on the remaining carbon budget. While the prevalent accounting framework for carbon emissions is production based (Production-Based Principle, PBP), we here quantify the CO2 emissions on the basis of the Consumption-Based Principle (CBP) for Austria. At a methodological level, a Multi-Regional Input–Output model with full linkages is used to account for Austria's CO2 responsibility on a global scale. Estimates are carried out for the years 1997 and 2004. Results show that during 1997 CO2 responsibility based on CBP were 36% larger than those based on PBP. This relation has increased through time. The CBP indicator of 2004 was 44% larger than the PBP. In terms of carbon emission location, for each Euro spent on Austrian final demand in 2004, it is estimated that two-thirds of the CO2 emissions occur outside Austrian borders. Regarding the origin of the emissions embodied in imports, it is estimated that about one-fourth originated in non-Annex I countries in 1997. This proportion increased to one-third by 2004. Due to this divergence between CBP and PBP indicators, there is a need to re-think current accounting bases in order to properly assign CO2 responsibilities.

Abstract With the increasing share of renewables in electricity generation in Europe, implied economy-wide macroeconomic feedbacks and spill-over effects to other sectors and actors are of rising importance. We quantify the macroeconomic effects of a large-scale expansion of wind and photovoltaics (PV) in Europe, employing a global multi-regional multi-sectoral computable general equilibrium (CGE) model. We place special emphasis on electricity market integration costs, which have so far been neglected not only in most bottom-up technology comparisons, but also in macroeconomic studies. We find that the societal welfare effects of a large-scale expansion of wind and PV tend to be positive; however, when integration costs are taken into account, positive welfare effects are either much smaller or even become negative, depending very much on regional characteristics, such as the prevailing electricity mix, weighted average costs of capital (WACC) or capacity factors. We also show that macroeconomic feedback effects raise generation costs above what is anticipated from a bottom-up perspective, since the high capital intensities of renewable electricity generation technologies drive up economy-wide capital prices. This may imply that they are no longer competitive when installed at large-scales.

Abstract To limit global temperature increase below +2°C, societies need to reduce greenhouse gas emissions radically within the next few decades. Amongst other mitigation measures, this requires transforming process-emission intensive industries towards emission neutrality. One way to this end is the renewables-based electrification of industries. We present results of a recent co-production process which brought together stakeholders from industry, policy, administration and science to co-create climate-neutral transition pathways for the steel and electricity sectors in Austria. The results summarized here are the definition of reliable pathways and the identification of associated risks pertaining to pathway implementation, including a macro-economic quantification. We find that risks to implementation (barriers) are at least as important as risks of implementation (negative consequences). From the quantitative analysis we find that, provided that barriers can be reduced, macroeconomic costs of the transition are only moderate and that stakeholders might overestimate risks, when neglecting economy-wide feedbacks.

Abstract Increasing penetration of zero marginal cost variable renewable technologies cause the decline of wholesale electricity prices due to the merit-order effect. This causes a “cannibalization effect” through which increasing renewable technologies’ penetration undermines their own value. We calculate solar and wind daily unit revenues (generation weighted electricity prices) and value factors (unit revenues divided by average electricity prices) from hourly data of the day-ahead California wholesale electricity market (CAISO) for the period January 2013 to June 2017. We then perform a time series econometric analysis to test the absolute (unit revenues) and relative (value factors) cannibalization effect of solar and wind technologies, as well as the cross-cannibalization effects between technologies. We find both absolute and relative cannibalization effect for both solar and wind, but while wind penetration reduces the value factor of solar, solar penetration increases wind value factor, at least at high penetration and low consumption levels. We explore non-linearities and also find that the cannibalization effect is stronger at low consumption and high wind/solar penetration levels. This entails that wind and (mainly) solar competitiveness could be jeopardized unless additional mitigation measures such as storage, demand management or intercontinental interconnections are taken.

Having agreed upon a binding emissions reduction path by 2020, the EU plays a leading role in international climate policy. The EU currently pursues a dual approach through an Emissions Trading Sch...

Climate change mitigation requires a rapid decrease of global emissions of greenhouse gases (GHGs) from their present value of 8.4 Gt/C/year to, as of current knowledge, approximately 1 GtC/year by the end of the century. The necessary decrease of GHG emissions will have large impacts on existing and new investments with long lifetimes, such coal-fired power plants or buildings. Strategic decision making for major investments can be facilitated by indicators that express the likelihood of costly retrofitting or shut-down of carbon intensive equipment over time. We provide a set of simple indicators that support assessment and decision making in this field. Given a certain emissions target, carbon allowance prices in a cap-and-trade plan will depend on the development of the global economy and the degree to which the target is approached on the global and national levels. The indicators measure the degree to which a given emissions target is approached nationally and assess risks for long-lived investments subject to a range of emissions targets. A comparative case study on existing coal-fired power plants with planned plants and utility-scale photovoltaic power-plants confirms that high risk for coal-fired power plants is emerging. New legislation further confirms this result.