Power Generation Investments and Technology Choices under Emissions Trading

Abstract

The overall purpose of this paper is to analyse how power generation technology choices will be affected by climate policy. Special attention is paid to the dissemination of renewable power technologies following climate policy initiatives in Sweden and Eastern Europe. An overall conclusion is that carbon policy will affect new investments in renewable power technologies in both Sweden and Eastern Europe, but it is difficult to provide a comprehensive assessment of the future power generation technology mix. In the Swedish case, it is suggested that in general it is not certain that compliance with the Kyoto commitments implies substantial increases in renewable power sources. If, therefore, renewable power sources are favoured for reasons beyond climate policy, additional policy instruments will be needed. In the Eastern European case it is indicated that although it is clear that the Eastern European countries are not homogeneous in terms of CO₂ abatement potential and costs, no single country emerges as particularly low‐cost. This may have important implications for future JI/CDM activities. For instance, risk factors such as policy uncertainty and institutional obstacles may become crucial in determining the future allocation of JI/CDM projects across the region.

Acknowledgements

Generous financial support from the Research School ‘Global Resources’ at the Luleå University of Technology as well as from the Swedish Research Council for Environment, Agricultural Sciences and Spatial Planning (FORMAS), and Hans Dahlberg's Foundation for Environment and Health (stiftelse för miljö och hälsa) are gratefully acknowledged.

Notes

1. This section draws heavily on the results from Pettersson (2005).

2. The results in this section draw heavily on Pettersson (2007).

3. Regional Air Pollution Information and Simulation model. For further information of the RAINS model see, e.g., Syri et al. (2001).