The EU emissions trading system's (ETS) invalidation rule implies that shocks and overlapping policies can change cumulative carbon emissions. This paper explains these mechanisms and simulates the ...effect of COVID-19, the European Green Deal, and the recovery stimulus package on cumulative EU ETS emissions and allowance prices. Our results indicate that the negative demand shock of the pandemic should have a limited effect on allowance prices and rather translates into lower cumulative carbon emissions. Aligning EU ETS with the 2030 reduction target of -55% might increase allowance prices to 45-94 €/ton CO
today and reduce cumulative carbon emissions to 14.2-18.3 GtCO
compared to 23.5-33.1 GtCO
under a -40% 2030 reduction target. Our results crucially depend on when the waterbed will be sealed again, which is an endogenous market outcome, driven by the EU ETS design, shocks and overlapping climate policies such as the recovery plan.
The value of lost load (VOLL) is an essential parameter for power system reliability. It represents the cost of unserved energy during power interruptions. Various studies have estimated this ...parameter for different countries and more recently, for different interruption characteristics – such as interruption duration, time of interruption and interrupted consumer. However, it is common practice in system operation and the literature to use only one uniform VOLL. Our theoretical analysis shows that using more-detailed VOLL data leads to more cost-effective transmission reliability decisions. Using actual consumer- and time-differentiated VOLL data from Norway, Great Britain and the United States, numerical simulations of short-term power system reliability management indicate a potential operational cost decrease of up to 43% in a five-node network, and between 2% and 18% in a more realistic 118-node network – mainly because of lower preventive redispatch costs in response to lower expected interruption costs. However, changed reliability practices could lead to opposition, if some consumers are disproportionately interrupted and not adequately compensated. Although the first policy measures to collect more detailed and harmonized VOLL data have been taken, future policy should improve transmission-distribution coordination and enable the participation of all consumers in curtailment programs, through smart meters and smart appliances.
•Value of lost load depends on interruption duration, time of interruption and interrupted consumer.•Using more-detailed VOLL data leads to more cost-effective transmission reliability decisions.•We estimate a potential operational cost decrease of up to 43% using actual VOLL data.•Smart meters and appliances enable the participation of consumers in curtailment programs.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
This paper surveys climate and energy policy in the EU transport sector covering the road, aviation, and shipping sectors. We summarise current policies, focusing on the Fit for 55 Package, and link ...the different instruments being used (e.g. cap-and-trade, tax, mandate, performance standard, or subsidy) to different sources of market failure. Next, we analyse the static and dynamic cost-efficiency of the policies and instruments. We find that they address a range of market inefficiencies, but that there are still a number of aspects that can further improve the cost-effectiveness of current EU climate policies in the transport sector. For example, higher taxes and emission performance standards for aviation and shipping, the right combination of research and innovation investments and learning-by-doing policies, and balancing implicit carbon prices by revising the road tax system and adding congestion tolls and charges. Finally, European policy has important side effects on the rest of the world that need to be taken into account in the selection of policies. This improved set of policies can support a sustainable recovery and reach the European Union's climate targets at the lowest cost.
•Summary of all European climate ‘Fit for 55’ transportation policies .•Discussion of road, aviation, and shipping sectors.•Categorisation of policy instruments addressing a range of market inefficiencies.•Recommendations for further improvement of transportation policies.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
This paper studies linear cost-efficiency and quality incentives that are increasingly being used to regulate electricity and gas network utilities. The analysis shows that cost and quality ...incentives have asymmetric impacts on firms’ choices of efficiency and quality, and that the incentive powers should be equal and less than maximal when there is information asymmetry about firm costs and a dislike for network utility surplus. As in most existing regulations quality incentives have a higher power than cost-efficiency incentives, the model predicts that supplied quality is too high. Finally, the paper discusses examples of linear sliding-scale incentive regulation in Norway and Great Britain. The findings of this study provide guidance for regulators and policymakers looking to optimally use linear incentives to regulate energy network utilities.
•Linear sliding-scale incentives are increasingly used to regulate network utilities.•This paper studies the effect of combining cost-efficiency and quality incentives.•Cost and quality incentives have asymmetric impacts on efficiency and quality.•Incentive powers should be equal and less than one under information asymmetry.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
This paper studies the consistency between two contradictory policies in the electricity industry. On the one hand, electricity systems are increasingly interconnected. On the other hand, reliability ...standards, whose value was typically set when countries were hardly interconnected, are still enforced at the national level. We show that enforcing autarky reliability standards may still reach the welfare optimum in the presence of interconnections, but only under two conditions. First, installed generation capacities should be determined jointly, while considering the whole power system. Second, reliability calculations should fully internalize external adequacy benefits occurring in neighboring systems. We run a numerical application for a set of European countries and find that existing interconnections may lead to generation adequacy benefits of around one billion euros per year, by enabling a 18.9 GW decrease in generation capacity. In our case study, regional coordination is found to be more important than fully internalizing external reliability benefits in adequacy simulations.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
To provide a strong price signal for greenhouse gas emissions abatement, Europe decided to strengthen the European Union Emissions Trading System (EU ETS) by implementing a market stability reserve ...(MSR) that includes a cancellation policy and to increase the linear reduction factor from 1.74% to 2.2% after 2020. Results of a detailed long-term investment model, formulated as a large-scale mixed complementary problem, show that this strengthened EU ETS may quadruple EUA prices and may decrease cumulative CO2 emissions with 21.3 GtCO2 compared to the cumulative cap before the strengthening (52.2 GtCO2). Around 40% of this decrease (8.3 GtCO2) is due to the increased linear reduction factor and 60% due to the cancellation policy (13 GtCO2). Without the increased linear reduction factor, the MSR's cancellation policy would decrease emissions by only 4.1 GtCO2, indicating their complementarity. A sensitivity analysis on key model assumptions and parameters reveals that the impact of the MSR is, however, strongly dependent on other policies (e.g., renewable energy targets, nuclear, lignite and coal phase-outs) and cost evolutions of abatement options (e.g., investment cost reductions for wind and solar power). This renders the effective CO2 emissions cap highly uncertain. In our simulation results, cancellation volumes range between 5.6 and 17.8 GtCO2, which is to be compared with our central estimate of 13 GtCO2. We calculate the required linear reduction factors to achieve these CO2 emission reductions without an MSR, which would remove all uncertainty on the cumulative CO2 emissions and interference with other complementary climate or energy policies.
•Europe strengthened the market stability reserve in the emission trading system.•We develop a detailed long-term investment model to study the impact of this policy.•Results show that this policy may lay at the root of the quadrupled emission allowance prices.•Cumulative emissions (2017–2061) may decrease by 21.3 GtCO2, of which 13 GtCO2 due to cancellation.•Feedback effect between abatement costs and cancellation renders effective emissions cap highly uncertain.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
In the presence of transmission outages, uncertain demand and variable renewable supply, network operators keep a reliability margin to avoid interruptions and black-outs. The reliability margin is ...presently determined by the N-1 reliability criterion. Our analytical model defines the optimal reliability margin by balancing congestion costs and interruption costs. This leads to more efficient use of transmission capacity and to smaller investment needs than with the N-1 criterion. A numerical illustration shows the net benefits of the new reliability criterion.
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BFBNIB, CEKLJ, DOBA, IZUM, KILJ, NUK, PILJ, PNG, SAZU, SIK, UILJ, UKNU, UL, UM, UPUK
This study examines how messaging approaches in a prosocial intervention can influence not only the effectiveness of the intervention but also, contagion afterward. Our investigation focuses on ...leveraging two motivations for solar adoption: self-interest and prosocial. Using data from a natural field experiment in 29 municipalities containing 684,000 people, we find that selfinterest messaging is twice as effective in inducing solar adoption both during and after the intervention. Adoptions under self-interest messaging have 10% higher net present value, but prosocial messaging increases the likelihood that adopters recommend solar to their friends and neighbors. Income moderates the effectiveness of self-interest messaging, performing much better in high-income communities than low- and moderate-income communities. There was no significant difference across income groups for prosocial messaging. These results provide guidance to policy makers aiming to encourage prosocial behavior across all income groups.
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BFBNIB, NMLJ, NUK, PNG, SAZU, UL, UM, UPUK
Policy synergy is crucial to achieving unified national strategies in the effective implementation of policy. This study investigates the synergistic effectiveness of China's renewable energy (RE) ...policy tools by analyzing 7920 RE policy texts issued by provincial governments between 2005 and 2020. By proposing the “Policy Text Quantification-Association Rule Mining-Synergy Effect Test” framework, we explore how the interaction between five policy tools affects Chinese provincial RE development. Results show that provincial policy texts mainly use targets & planning and industrial development with lower stringency than the other three tools. More importantly, targets & planning policies interact positively with operations management and industrial development, as they help reduce the uncertainty during concrete implementation in achieving expected targets and plans. On the other hand, industrial development and financial support policies could potentially repeat incentives on specific industries or enterprises, amplify unequal resource allocation and market distortion, failing to generate synergy effects.
•Synergistic effectiveness of China's renewable energy policy tools is explored•A provincial rating scale of RE policy tools is developed from strictness and rigor•Targets & Planning and Operations Management policies achieve effective synergy•Industrial development policies interact negatively with financial support policies
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
This study examines how messaging approaches in a prosocial intervention can influence not only the effectiveness of the intervention but also, contagion afterward. Our investigation focuses on ...leveraging two motivations for solar adoption: self-interest and prosocial. Using data from a natural field experiment in 29 municipalities containing 684,000 people, we find that self-interest messaging is twice as effective in inducing solar adoption both during and after the intervention. Adoptions under self-interest messaging have 10% higher net present value, but prosocial messaging increases the likelihood that adopters recommend solar to their friends and neighbors. Income moderates the effectiveness of self-interest messaging, performing much better in high-income communities than low- and moderate-income communities. There was no significant difference across income groups for prosocial messaging. These results provide guidance to policy makers aiming to encourage prosocial behavior across all income groups.
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BFBNIB, NMLJ, NUK, PNG, SAZU, UL, UM, UPUK
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