Impact of renewables deployment on the CO2 price and the CO2 emissions in the European electricity sector

As of 2005, electricity generators in Europe operate under the European Union Emission Trading System (EU ETS). At the same time, European Member States have launched support mechanisms to stimulate the deployment of renewable electricity sources (RES-E). RES-E injections displace CO2 emissions within the sectors operating under the EU ETS and they reduce the demand for European Union Allowances (EUAs), thereby reducing the EUA price. This paper presents the results of an ex post analysis to quantify the impact of RES-E deployment on the EUA price and CO2 emissions in the Western and Southern European electricity sector during the period from 2007 to 2010, following from an operational partial equilibrium model of the electricity sector. This study shows that the CO2 displacement from the electricity sector to other ETS sectors due to RES-E deployment can be up to more than 10% of historical CO2 emissions in the electricity sector. The EUA price decrease caused by RES-E deployment turns out to be likely significant. (C) 2013 Elsevier Ltd. All rights reserved.