Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171716
Authors: 
Abrell, Jan
Kosch, Mirjam
Rausch, Sebastian
Year of Publication: 
2017
Series/Report no.: 
Economics Working Paper Series 17/273
Abstract: 
This paper exploits the randomness and exogeneity of weather conditions to identify the economic cost of decarbonization through renewable energy (RE) support policies. We find that both the aggregate cost and the distribution of cost between energy producers and consumers vary significantly depending on which type of RE technology is promoted reflecting substantial heterogeneity in production cost, temporal availability of natural resources, and market conditions (i.e., time-varying demand, carbon intensity of installed production capacities, and opportunities for cross-border trade). We estimate that the cost for reducing one ton of CO2 emissions through subsidies for solar are EUR 500-1870. Subsidizing wind entails significantly lower cost, which can even be slightly negative, ranging from EUR 5-230. While the economic rents for energy producers always decrease, consumers incur three to five times larger costs when solar is promoted but gain under RE policies promoting wind.
Subjects: 
Decarbonization
Renewable Energy Policies
Wind
Solar
Electricity
Economic Cost
Distributional impacts
JEL: 
Q28
Q48
Q54
L94
C01
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
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