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ID: 150443

Carbon price and wind power support in Denmark / Gavard, Claire

Gavard, Claire	Journal Article
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Summary/Abstract

This paper aims at characterizing the conditions of wind power deployment in order to infer a carbon price level that would provide wind power with comparable advantage over fossil fuel technologies as effective wind support policies. The analysis is conducted on Denmark after the electricity market liberalization. Probit and tobit techniques are employed to take account of a potential threshold effect. I find that the level and type of the support policy are the dominant drivers of deployment. A feed-in tariff significantly brings more wind power in than a premium policy. The additional capacity installed monthly increases by more than 1 MW for each additional €/MWh of support. This is compared to the effect of the electricity price, investment cost, interest rate and general economic activity. If the policy is a premium, I find that 23€/MWh of support in addition to electricity price is needed to observe the connection of new turbines to the grid with a 0.5 probability. I convert this support level into a carbon price of 27€/ton if wind power competes with coal, and 48€/t if it competes with gas.

Key Words

Renewable ; Emissions ; Wind ; Feed-in Tariff ; Carbon ; Subsidy

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ID: 186482

Using emissions trading schemes to reduce heterogeneous distortionary taxes: the case of recycling carbon auction revenues to support renewable energy / Gavard, Claire

Gavard, Claire	Journal Article
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We examine the economic impacts of using the revenues from environmental taxation to reduce a pre-existing distortionary tax in a multisector economy where the environmental regulation and pre-existing distortionary tax apply heterogeneously across polluting sectors. With a numerical framework including a detailed sectoral disaggregation, we quantify these in the specific case of the European Union where carbon pricing coexists with electricity levies employed to support renewable energy. We find that using auction revenues from the EU Emissions Trading System (ETS) to reduce the national levies results in a 1.8% ETS carbon price increase but a 5.9% drop in the non-ETS carbon constraint. While the energy intensive sectors often benefit from electricity levy exemptions, the combination of these exemptions and of the recycling of carbon auction revenues to support renewable energy makes the ETS sectors worse off than if carbon revenues are transferred to households. In aggregate, the recycling option analysed here results in a GDP gain due to its impacts on the non-ETS sectors, the reduction of the electricity levy and associated distortionary effects.

Key Words

Renewable Energy Support ; Emissions Trading Scheme ; Revenue Recycling ; Carbon Auctions ; Electricity Levy

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