Policies promoting decarbonisation of energy supply under uncertainty: Where, how and when to abate

Titolo Rivista ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT
Autori/Curatori Francesco Gullì, Maurizio Repetto
Anno di pubblicazione 2024 Fascicolo 2024/1
Lingua Inglese Numero pagine 40 P. 131-170 Dimensione file 406 KB
DOI 10.3280/EFE2024-001009
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Energy supply is responsible of more than 80% of anthropogenic carbon emissions whose rapid accumulation in the atmosphere is in turn responsible of unsustainable global warming (overshoot of 1.5 °C) to avoid which carbon neutrality should be achieved in a few decades. “Accelerating” the (supposed) decarbonization of energy supply in sectors different of power generation is commonly considered a necessary step to reach such a goal. Nevertheless, this article points out that (at least in principle) this kind of “acceleration” (e.g. through indis- criminate targets and stringent policy provisions, including over-subsidies for RES producers) might not be desirable. In fact, the allocation of renewables (among different uses, different abatement carriers and over time) is by no means a trivial choice. To explain why, we focus on thermal and transport sectors and analyse the main energy carriers of abatement (electrifi- cation, biomethane and hydrogen), looking for intertemporal and interspatial optimization of renewables allocation, by estimating the LSCOA (levelized social cost of abatement), and by accounting for uncertainty about energy prices and renewable costs. The principal conclusion is that, before electricity supply is fully decarbonised, only greenfield biomethane should be allocated to thermal and transport uses, in the meantime “accelerating” the allocation of elec- tric renewables to power generation. Only when this latter is almost completely decarbonised, policies should promote deep green (now really) electrification of thermal (not “hard to abate”) and transport (light-duty) uses. Otherwise, the risk is to significantly slow down the entire process of energy supply decarbonization, and even to undermine the achievement of the climate targets. Finally, regarding green hydrogen, it should be allocated to the so-called “hard to abate” uses (including heavy transport) and to improve (as storage option) electric renewable competitiveness

Keywords:energy supply, decarbonisation, renewable energies, social-cost benefit analysis

Jel codes:Q48, Q58, O33

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Francesco Gullì, Maurizio Repetto, Policies promoting decarbonisation of energy supply under uncertainty: Where, how and when to abate in "ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT" 1/2024, pp 131-170, DOI: 10.3280/EFE2024-001009