Subsidising carbon capture. Effects on energy prices and market shares in the power market

Finn Roar Aune (), Gang Liu, Knut Einar Rosendahl and Eirik Lund Sagen
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Eirik Lund Sagen: Statistics Norway, https://www.ssb.no/en/forskning/ansatte

Discussion Papers from Statistics Norway, Research Department

Abstract: This paper examines how ambitious climate policies and subsidies to carbon capture may affect international energy prices and market shares in the power market. A detailed numerical model of the international energy markets is used. We first conclude that an ambitious climate policy alone will have substantial effects in the power market, with considerable growth in renewable power production and eventually use of carbon capture. Gas power production will also benefit from such a policy. Subsidising carbon capture and storage (CCS) will significantly accelerate the use of this technology. Nevertheless, total production of coal and gas power (with or without CCS) is only marginally increased, as the subsidy mainly leads to installation of CCS equipment on existing plants, reducing the efficiency from these plants. Consequently, electricity prices are almost unchanged, and the substantial growth in renewable power production is hardly affected by the subsidies to CCS.

Keywords: Energy markets; Climate policy; Carbon capture (search for similar items in EconPapers)
JEL-codes: H23 Q40 Q54 (search for similar items in EconPapers)
Date: 2009-10
New Economics Papers: this item is included in nep-cmp, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ssb:dispap:595

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