Policies for decarbonizing a liberalized power sector

Newbery, David

doi:10.5018/economics-ejournal.ja.2018-40

Cited by 16 publications

(15 citation statements)

References 29 publications

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“…IEA (2017b, Box 11.3) notes that for Europe "a CO 2 price in the range of $50-80 per tonne of CO 2 (tCO 2 ) by 2025 would expand the market opportunities for existing gas-fired power plants". In general, the carbon price that induces coal-to-gas switching is sensitive to coal and gas prices (Newbery, 2018a); a €1/MWh th fall in the gas price, all else equal, requires a carbon price rise of around €5/tCO 2 to maintain its carbon-inclusive cost. 22 The SCC measures the present social cost of future climate-related damages-for which the social discount rate is the appropriate discount factor.…”

Section: Political Economy Analysis Of An Eu-wide Carbon Price Floormentioning

confidence: 99%

The Political Economy of a Carbon Price Floor for Power Generation

Newbery¹,

Reiner²,

Ritz³

2019

The Energy Journal

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The EU carbon price lies well below estimates of the social cost of carbon and "targetconsistent" carbon prices needed to deliver ambitious targets such as the 40% reduction target for 2030. In light of this, the UK introduced a carbon price floor (CPF) for its electricity sector in 2013 and the new Dutch Government has recently made a similar commitment, while successive French Governments have called for an EU-wide CPF. This paper analyzes the impacts and design of a power-sector CPF, both at the EU and national level, using a political-economy approach. We find a good case for introducing such a price-based instrument into the EU ETS. We suggest that a CPF should be designed to "top up" the EUA price to €25-30/tCO 2 , rising annually at 3-5% above inflation, at least until 2030. We argue that the new EU Market Stability Reserve enhances the value of a CPF in terms of delivering climate benefits, and discuss the potential for a regional CPF in North-West Europe. We also review international policy experience with price floors (and ceilings).

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Section: Political Economy Analysis Of An Eu-wide Carbon Price Floormentioning

confidence: 99%

The Political Economy of a Carbon Price Floor for Power Generation

Newbery¹,

Reiner²,

Ritz³

2019

The Energy Journal

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“…In a second-best setting, where, due to political economy reasons, the negative externality cannot be internalized directly or optimally through Pigouvian taxation but only by renewable subsidization (e.g. Kalkuhl et al, 2013), the focus lies on the relative efficiency of different renewable subsidy schemes (Palmer and Burtraw, 2005;Newbery, 2016).…”

Section: Interaction Of Climate and Renewable Policy And Real-time Prmentioning

confidence: 99%

Start-up costs of thermal power plants in markets with increasing shares of variable renewable generation

2017

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“…The EU has withheld 900 million carbon credits from auction to rebalance supply and demand. 71 Further, the Market Stability Reserve (MSR) aims to improve the ETS's resilience to major shocks and reduce the number of carbon credits auctioned per annum at an accelerated rate. The EU ETS reforms are expected to increase carbon prices to €30/tCO 2 in 2020 and €70/tCO 2 in 2030.…”

Section: Cost Of Emissionsmentioning

confidence: 99%

Current and Future Challenges Facing the European Union's Energy System

Tulloch

Caldecott

2016

SSRN Journal

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The EU energy system is in the middle of a period of profound change. Financing the transition to a low-carbon EU economy is expected to require $2.2 trillion by 2035, requiring substantial private capital. However, investors are hesitant to commit capital due to many challenges facing the energy system. This review provides a high-level discussion regarding the challenges and the potential solutions to address them. We identify four main challenges: 1) structural challenges and reduced capacity adequacy, 2) an incorrect market framework to value flexibility, 3) the inability to finance the energy transition, and 4) the role of transitional fuels. Against these challenges, four potential solutions are: 1) capacity remuneration mechanisms, 2) demand-side response and consumer empowerment, 3) reforms in emissions trading and renewable subsidies, and 4) improved physical interconnections and governance. The EU's ability to address these challenges will directly impact its position as a global leader in green energy investment.

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Policies for decarbonizing a liberalized power sector

Cited by 16 publications

References 29 publications

The Political Economy of a Carbon Price Floor for Power Generation

The Political Economy of a Carbon Price Floor for Power Generation

Start-up costs of thermal power plants in markets with increasing shares of variable renewable generation

Current and Future Challenges Facing the European Union's Energy System

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