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This paper assesses the economic impacts of linking the EU emissions trading scheme (ETS) to emerging schemes beyond Europe in the presence of a post-Kyoto agreement in 2020. Numerical simulations with a multi-country equilibrium model of the global carbon market show that linking the European ETS induces only minor economic benefits. As trading is restricted to energy-intensive companies that are assigned high initial emissions, the major compliance burden is carried by the non-trading industries excluded from the linked ETS. In the presence of parallel government trading under a post-Kyoto Protocol, the burden of the excluded sectors can be substantially alleviated by international permit trade at the country level. However, the parallel carbon markets of linked ETS companies and post-Kyoto governments are still separated here. From an efficiency perspective, the most desirable future climate policy regime is thus represented by a joint trading system facilitating international emissions trading between ETS companies and post-Kyoto governments. While the Clean Development Mechanism is not able to attenuate the inefficiencies within linked ETS, in a parallel or joint trading regime the economy-wide access to project-based abatement options in developing countries induces large additional cost-savings.

Industrialized countries around the world have set ambitious climate targets and face the challenge that existing mechanisms for CO2 pricing alone are not sufficient to achieve the desired level of ambition. In a multi-level electricity market model that captures investments in grid and generation capacities as well as electricity trading, we analyze different policy approaches to curb emissions by phasing out emission-intensive technologies, expanding renewables or by simply tightening CO2 pricing. We extend existing modelling approaches to endogenize (welfare-optimal) expansion of renewable energy capacities, taking into account the respective grid expansion necessary for a particular expansion path. Applying the approach to the German electricity market shows that both, the strengthening of the incentives from emissions trading through a minimum CO2 price as well as a forced complete coal exit lead to a significant additional decrease in emissions. The stepwise coal phase-out as decided in Germany, on the other hand, does not come close to achieving this reduction in emissions, largely due to the sequence of the phase-out decided (first hard coal, then lignite). The avoided CO2 emissions are accompanied by significant welfare gains in the respective scenarios. Further welfare gains can be achieved through a system-optimal expansion of renewables, especially because grid expansion can be avoided. We also consider different ways to remunerate renewables for all scenarios. It turns out that the renewable generators’ revenues from the electricity market together with the revenues from CO2 pricing are fully sufficient to finance renewables.

The bigger picture Renewable energy technologies are necessary to maintain secure energy supplies and limit the impacts of climate change. Developments of these technologies are mostly planned purely based on economic criteria, but this can lead to resistance in local communities. Among the diverse renewable technologies, especially onshore wind turbines may negatively affect the scenicness of beautiful landscapes. We analyze how cost-efficient local energy systems could be impacted through public opposition toward onshore wind. In doing so, we draw on a database of public evaluation of landscape beauty across Germany. In the energy systems of German municipalities with high scenicness, onshore wind would mainly be replaced by solar photovoltaics. Depending on the location, the local energy systems may be associated with a significant increase in costs and CO$_{2}$ emissions. These insights can support local and national stakeholders in making decisions relating to energy and climate policy. Summary Local resistance often hinders renewable energy technology developments, especially for onshore wind. In decentralized energy systems, the landscape impact of wind turbines or transmission lines is a key barrier to public acceptance. By using landscape scenicness as a proxy for public acceptance, we quantify its impact on the optimal energy systems of 11,131 German municipalities. In municipalities with high scenicness, it is likely that onshore wind will be rejected, leading to higher levelized costs of energy by up to about 7 €-cent/kWh. Onshore wind would be replaced mainly by solar photovoltaics and imports, and the cost-optimal energy systems would be associated with higher CO$_{2}$ emissions of up to about 200 gCO$_{2}$/kWh compared with an average of around 50 gCO$_{2}$/kWh. The findings help to identify municipalities where public resistance to onshore wind could be particularly high and support the scientific and policy debate about the location of onshore wind farms.

AbstractWe analyze whether lower rents for energy-inefficient apartments reflect tenants’ willingness to pay due to a higher green awareness, purchasing power, or energy consumption costs. Based on a German rental apartment dataset from Q1 2007 to Q1 2019, we use interaction terms for socioeconomic characteristics in a hedonic regression model. We find that rents are lower for apartments with higher energy consumption, even in neighborhoods with lower levels of green awareness. This relationship is stronger in neighborhoods with higher purchasing power, such that communities with low levels of green awareness and high purchasing power show the steepest negative slope for increasing energy consumption (−8.6% from the highest to lowest rating). Thus, the rent-decreasing effect of purchasing power is higher than that of green awareness. Splitting the entire period into smaller windows, we find that the interaction effect of green awareness has emerged in the most recent years (2017–2019). This may be driven by changes in regulation, which have made it easier for tenants to assess the energy consumption before they rent, or by a general increase in green awareness over this period.

Despite the high CO2 emission intensity of fossil and especially coal fired energy production, these energy carriers will play an important role during the coming decades. The case study identifies the main technological trajectories concerning more efficient fossil fuel combustion and explores the potentials for lead markets for these technologies in China, Germany, Japan and the USA taking into account the different regulation schemes in these countries. We concentrate on technologies that have already left the demonstration phase. This is the case for supercritical (SC) and ultra-supercritical (USC) pulverized coal technologies that are already established. The analysis shows that the typical pattern of a stable lead market only applies to a limited extent. In the 1960s and 1970s, the USA has established a lead market for SC und USC technologies. In the meanwhile, Japan has surpassed the United States, although it started as a typical lag market. Japan has caught up in terms of supply factors, China in terms of price, demand and regulation advantage. This supports the hypothesis that - apart from the demand-oriented lead market model - push factors such as R&D activity play a strong role as well. The advantage of Japan mainly stems from its intensive R&D activities. It can also be observed that some other advantages – such as price and demand advantage – are shifting to China. China is practicing a leapfrogging strategy, and has already become a leader in the market segment of low and middle quality boilers, whereas Japan and Germany still dominate the world turbine market. The conclusion is that lead markets may switch over time to markets with high growth rates, although first mover advantages exist for some market segments such as turbines. First movers have a strong technological expertise which is important in the catching up process of late followers, and they may even profit from the growth in lag countries by exporting and cooperation activities. Thus international technology cooperation is a beneficial process for all involved parties.

We investigate the effect of the physical presence of wind turbines on residential well-being in Germany, using panel data from the German Socio-Economic Panel (SOEP) and a unique novel panel data set on more than 20,000 wind turbines for the time period between 2000 and 2012. Using a Geographical Information System (GIS), we calculate the proximity between households and the nearest wind turbine as the most important determinant of their disamenities, e.g. visual interference into landscape aesthetics. Our unique novel panel data set on wind turbines, which was collected at the regional level, includes their exact geographical coordinates and construction dates. This allows estimating the causal effect of the physical presence of wind turbines on residential well-being, using a difference-in-differences design. To ensure comparability of the treatment and control group, we apply propensity-score and novel spatial matching techniques based on exogenous weather data and geographical locations of residence, respectively. We show that the construction of a wind turbine within a treatment radius of 4,000 metres around households has a significantly negative effect on life satisfaction. For larger treatment radii, no negative externalities can be detected. Moreover, the effect is transitory, vanishing after five years at the latest. As wind turbines are addressed at avoiding negative externalities of local pollutant and global greenhouse gas emissions, they fulfill an important role in the de-carbonization of electricity systems world-wide. Comparing the imposed spatially and temporally limited externalities with the avoided externalities from emissions, the positive impact of wind turbines is by several magnitudes higher than the negative.