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One hundred and three estimates of the marginal damage costs of carbon dioxide emissions were gathered from 28 published studies and combined to form a probability density function. The uncertainty is strongly right-skewed. If all studies are combined, the mode is $2/tC, the median $14/tC, the mean $93/tC, and the 95 percentile $350/tC. Studies with a lower discount rate have higher estimates and much greater uncertainties. Similarly, studies that use equity weighing, have higher estimates and larger uncertainties. Interestingly, studies that are peer-reviewed have lower estimates and smaller uncertainties. Using standard assumptions about discounting and aggregation, the marginal damage costs of carbon dioxide emissions are unlikely to exceed $50/tC, and probably much smaller. © 2004 Elsevier Ltd. All rights reserved.

One hundred and three estimates of the marginal damage costs of carbon dioxide emissions were gathered from 28 published studies and combined to form a probability density function. The uncertainty is strongly right-skewed. If all studies are combined, the mode is $2/tC, the median $14/tC, the mean $93/tC, and the 95 percentile $350/tC. Studies with a lower discount rate have higher estimates and much greater uncertainties. Similarly, studies that use equity weighing, have higher estimates and larger uncertainties. Interestingly, studies that are peer-reviewed have lower estimates and smaller uncertainties. Using standard assumptions about discounting and aggregation, the marginal damage costs of carbon dioxide emissions are unlikely to exceed $50/tC, and probably much smaller. © 2004 Elsevier Ltd. All rights reserved.

Abstract Recent studies on global warming have introduced the inherent uncertainties associated with the costs and benefits of climate policies and have often shown that abatement policies are likely to be less aggressive or postponed in comparison to those resulting from traditional cost–benefit analyses (CBA). Yet, those studies have failed to include the possibility of sudden climate catastrophes. The aim of this paper is to account simultaneously for possible continuous and discrete damages resulting from global warming, and to analyse their implications on the optimal path of abatement policies. Our approach is related to the new literature on investment under uncertainty, and relies on some recent developments of the real option in which we incorporated negative jumps (climate catastrophes) in the stochastic process corresponding to the net benefits associated with the abatement policies. The impacts of continuous and discrete climatic risks can therefore be considered separately. Our numerical applications lead to two main conclusions: (i) gradual, continuous uncertainty in the global warming process is likely to delay the adoption of abatement policies as found in previous studies, with respect to the standard CBA; however (ii) the possibility of climate catastrophes accelerates the implementation of these policies as their net discounted benefits increase significantly.

Abstract Recent studies on global warming have introduced the inherent uncertainties associated with the costs and benefits of climate policies and have often shown that abatement policies are likely to be less aggressive or postponed in comparison to those resulting from traditional cost–benefit analyses (CBA). Yet, those studies have failed to include the possibility of sudden climate catastrophes. The aim of this paper is to account simultaneously for possible continuous and discrete damages resulting from global warming, and to analyse their implications on the optimal path of abatement policies. Our approach is related to the new literature on investment under uncertainty, and relies on some recent developments of the real option in which we incorporated negative jumps (climate catastrophes) in the stochastic process corresponding to the net benefits associated with the abatement policies. The impacts of continuous and discrete climatic risks can therefore be considered separately. Our numerical applications lead to two main conclusions: (i) gradual, continuous uncertainty in the global warming process is likely to delay the adoption of abatement policies as found in previous studies, with respect to the standard CBA; however (ii) the possibility of climate catastrophes accelerates the implementation of these policies as their net discounted benefits increase significantly.

Artículos en revistas The past two decades of growth in renewable energy sources of electricity (RES-E) have been largely driven by out-of-market support policies. These schemes were designed to drive deployment on the basis of specific subsidies sustained in time to allow for the larger costs as well as to limit investor risk. While these policies have proven to be effective, the way they have been designed to date has led to costly market distortions that are becoming more difficult to ignore as penetrations reach unpreceded levels. In the context of this growing concern, we provide a critical analysis of the design elements of RES-E support schemes, focusing on how they affect this trade-off between promoting and efficiently integrating RES-E. The emphasis is on the structure of the incentive payment, which in the end turns to be the cornerstone for an efficient integration. We conclude that, while needed, a well-designed and further developed capacity-based support mechanism complemented with ex-post compensations defined for reference benchmark plants, such as the mechanism currently implemented in Spain, is an alternative with good properties if the major goal is truly market integration. The approach is robust to future developments in technology cost, performance and market penetration of RES-E. info:eu-repo/semantics/publishedVersion

Artículos en revistas The past two decades of growth in renewable energy sources of electricity (RES-E) have been largely driven by out-of-market support policies. These schemes were designed to drive deployment on the basis of specific subsidies sustained in time to allow for the larger costs as well as to limit investor risk. While these policies have proven to be effective, the way they have been designed to date has led to costly market distortions that are becoming more difficult to ignore as penetrations reach unpreceded levels. In the context of this growing concern, we provide a critical analysis of the design elements of RES-E support schemes, focusing on how they affect this trade-off between promoting and efficiently integrating RES-E. The emphasis is on the structure of the incentive payment, which in the end turns to be the cornerstone for an efficient integration. We conclude that, while needed, a well-designed and further developed capacity-based support mechanism complemented with ex-post compensations defined for reference benchmark plants, such as the mechanism currently implemented in Spain, is an alternative with good properties if the major goal is truly market integration. The approach is robust to future developments in technology cost, performance and market penetration of RES-E. info:eu-repo/semantics/publishedVersion

We take inspiration from the Modern Portfolio Theory introduced by Markowitz to propose a simplified strategy for the portfolio management of renewable energy sources based on Gaussian fluctuations with tunable correlations. By analyzing the impact of production fluctuations, we show how - depending on the sources' temporal correlation patterns - a careful geographical allocation of different types of renewal energy sources can reduce both the energy needs for balancing the power system and its uncertainty. The proposed strategy can be easily integrated in a decision support system for the planning of renewable energy sources. Therefore, providing policy/decision makers with an additional tool. We test our strategy on a set of case studies including a real-case based on literature data for solar and wind sources, and discuss how to extend the computation to non-Gaussian sources. The paper shows that in the Markowitz framework an efficient trade-off between production and fluctuations can be easily achieved, and that such framework also leads to important considerations on energy security. In perspective, analysis of time series together with such enriched frameworks would allow for the analysis of multiple realistic renewable generation scenarios helping decisions on the optimal size and spatial allocation of future energy storage facilities.

We take inspiration from the Modern Portfolio Theory introduced by Markowitz to propose a simplified strategy for the portfolio management of renewable energy sources based on Gaussian fluctuations with tunable correlations. By analyzing the impact of production fluctuations, we show how - depending on the sources' temporal correlation patterns - a careful geographical allocation of different types of renewal energy sources can reduce both the energy needs for balancing the power system and its uncertainty. The proposed strategy can be easily integrated in a decision support system for the planning of renewable energy sources. Therefore, providing policy/decision makers with an additional tool. We test our strategy on a set of case studies including a real-case based on literature data for solar and wind sources, and discuss how to extend the computation to non-Gaussian sources. The paper shows that in the Markowitz framework an efficient trade-off between production and fluctuations can be easily achieved, and that such framework also leads to important considerations on energy security. In perspective, analysis of time series together with such enriched frameworks would allow for the analysis of multiple realistic renewable generation scenarios helping decisions on the optimal size and spatial allocation of future energy storage facilities.