The Cost of Climate and Renewable Electricity Policy in the Presence of Ancillary Pollution Benefits: An Application of the TIMES-Sweden Model

摘要

In the European Union, several policies and measures in the energy areas has been introduced. Important examples are the carbon dioxide (CO_2) trading system and renewable electricity targets (RES-e). While being in the same area, energy, the policies have been introduced at least partly for different reasons, CO_2 emissions reduction and security of supply, respectively. However, they also partly support each others goals. rnCO_2 is a global externality and, consequently, it does not matter where it is reduced and emissions could therefore be reduced were it can be done at lowest possible cost. International trade with CO_2 emission permits and the Kyoto Protocol flexibility mechanisms are often regarded as the most cost beneficial alternative for European nations to reach their climate mitigation obligations. On the contrary, NO_X, SO_2 and Particles are example of externalities of a more or less local character which mainly have an impact close to the point of emission. If these emissions are reduced in parallel with the CO_2 emissions, the economic incentive for decreasing also CO_2 within the region might increase. rnWhen climate policies (such as CO_2 taxes on fossil fuels) also can reduce other pollutants that are associated with fossil fuel this can be regarded as ancillary benefits defined “as the social welfare improvements…, which incidentally arise as a consequence of mitigation policies.” (Davis et al, 2000). A transfer from coal based to natural gas based electricity generation technologies will most likely lower NO_X-emissions, i.e. this is an example of a positive side effect from a climate policy. More uncertain are the side effects from a renewable policy leading biomass based generation replacing natural gas fired generation. In this case, the emissions of CO_2 will decrease but the NO_Xemission might increase, and the sum of the side effects can strike either way. rnIn Östblom and Samakovlis, (2004), the feedback effects on health and productivity due to NO_Xemission as a side effect from climate policy is investigated with a general equilibrium analysis applied on Sweden. They conclude that the advantage of allowing international trade with CO_2 permits as a policy instrument, instead of decreasing the CO_2 within the country, becomes less pronounced when also considering the external effects from other emission. Equal side benefits might also be found by increasing the share of electricity production from renewable energy sources, but the effects can be absent due to the NO_X emission from combustion of biomass. This would require further investigation. rnThe aim of the present study is to estimate the monetary side benefits of climate and RES-e policies in order to evaluate the benefits from actions taking place within the country as a contrast to buying CO_2 permits from abroad using Sweden as a case. This will be done by calculation of the emission reductions from a strengthening of the two polices. A baseline scenario with present price levels on CO_2 permits and present RES-e targets will be compared with scenarios with stronger targets. The total emission from each scenario will be computed by use of the national TIMES-Sweden model covering the complete energy supply and demand sector.