@article{BertramRiahiHilaireetal.2021, author = {Bertram, Christoph and Riahi, Keywan and Hilaire, J{\´e}r{\^o}me and Bosetti, Valentina and Drouet, Laurent and Fricko, Oliver and Malik, Aman and Nogueira, Larissa Pupo and van der Zwaan, Bob and van Ruijven, Bas and van Vuuren, Detlef P. and Weitzel, Matthias and Longa, Francesco Dalla and de Boer, Harmen-Sytze and Emmerling, Johannes and Fosse, Florian and Fragkiadakis, Kostas and Harmsen, Mathijs and Keramidas, Kimon and Kishimoto, Paul Natsuo and Kriegler, Elmar and Krey, Volker and Paroussos, Leonidas and Saygin, Deger and Vrontisi, Zoi and Luderer, Gunnar}, title = {Energy system developments and investments in the decisive decade for the Paris Agreement goals}, series = {Environmental research letters}, volume = {16}, journal = {Environmental research letters}, number = {7}, publisher = {IOP Publishing}, address = {Bristol}, issn = {1748-9326}, doi = {10.1088/1748-9326/ac09ae}, pages = {12}, year = {2021}, abstract = {The Paris Agreement does not only stipulate to limit the global average temperature increase to well below 2 °C, it also calls for 'making finance flows consistent with a pathway towards low greenhouse gas emissions'. Consequently, there is an urgent need to understand the implications of climate targets for energy systems and quantify the associated investment requirements in the coming decade. A meaningful analysis must however consider the near-term mitigation requirements to avoid the overshoot of a temperature goal. It must also include the recently observed fast technological progress in key mitigation options. Here, we use a new and unique scenario ensemble that limit peak warming by construction and that stems from seven up-to-date integrated assessment models. This allows us to study the near-term implications of different limits to peak temperature increase under a consistent and up-to-date set of assumptions. We find that ambitious immediate action allows for limiting median warming outcomes to well below 2 °C in all models. By contrast, current nationally determined contributions for 2030 would add around 0.2 °C of peak warming, leading to an unavoidable transgression of 1.5 °C in all models, and 2 °C in some. In contrast to the incremental changes as foreseen by current plans, ambitious peak warming targets require decisive emission cuts until 2030, with the most substantial contribution to decarbonization coming from the power sector. Therefore, investments into low-carbon power generation need to increase beyond current levels to meet the Paris goals, especially for solar and wind technologies and related system enhancements for electricity transmission, distribution and storage. Estimates on absolute investment levels, up-scaling of other low-carbon power generation technologies and investment shares in less ambitious scenarios vary considerably across models. In scenarios limiting peak warming to below 2 °C, while coal is phased out quickly, oil and gas are still being used significantly until 2030, albeit at lower than current levels. This requires continued investments into existing oil and gas infrastructure, but investments into new fields in such scenarios might not be needed. The results show that credible and effective policy action is essential for ensuring efficient allocation of investments aligned with medium-term climate targets.}, language = {en} } @article{HarmsenKrieglervanVuurenetal.2021, author = {Harmsen, Mathijs and Kriegler, Elmar and van Vuuren, Detlef P. and van der Wijst, Kaj-Ivar and Luderer, Gunnar and Cui, Ryna and Dessens, Olivier and Drouet, Laurent and Emmerling, Johannes and Morris, Jennifer Faye and Fosse, Florian and Fragkiadakis, Dimitris and Fragkiadakis, Kostas and Fragkos, Panagiotis and Fricko, Oliver and Fujimori, Shinichiro and Gernaat, David and Guivarch, C{\´e}line and Iyer, Gokul and Karkatsoulis, Panagiotis and Keppo, Ilkka and Keramidas, Kimon and K{\"o}berle, Alexandre and Kolp, Peter and Krey, Volker and Kr{\"u}ger, Christoph and Leblanc, Florian and Mittal, Shivika and Paltsev, Sergey and Rochedo, Pedro and van Ruijven, Bas J. and Sands, Ronald D. and Sano, Fuminori and Strefler, Jessica and Arroyo, Eveline Vasquez and Wada, Kenichi and Zakeri, Behnam}, title = {Integrated assessment model diagnostics}, series = {Environmental research letters}, volume = {16}, journal = {Environmental research letters}, number = {5}, publisher = {IOP Publishing}, address = {Bristol}, issn = {1748-9326}, doi = {10.1088/1748-9326/abf964}, pages = {13}, year = {2021}, abstract = {Integrated assessment models (IAMs) form a prime tool in informing about climate mitigation strategies. Diagnostic indicators that allow comparison across these models can help describe and explain differences in model projections. This increases transparency and comparability. Earlier, the IAM community has developed an approach to diagnose models (Kriegler (2015 Technol. Forecast. Soc. Change 90 45-61)). Here we build on this, by proposing a selected set of well-defined indicators as a community standard, to systematically and routinely assess IAM behaviour, similar to metrics used for other modeling communities such as climate models. These indicators are the relative abatement index, emission reduction type index, inertia timescale, fossil fuel reduction, transformation index and cost per abatement value. We apply the approach to 17 IAMs, assessing both older as well as their latest versions, as applied in the IPCC 6th Assessment Report. The study shows that the approach can be easily applied and used to indentify key differences between models and model versions. Moreover, we demonstrate that this comparison helps to link model behavior to model characteristics and assumptions. We show that together, the set of six indicators can provide useful indication of the main traits of the model and can roughly indicate the general model behavior. The results also show that there is often a considerable spread across the models. Interestingly, the diagnostic values often change for different model versions, but there does not seem to be a distinct trend.}, language = {en} } @techreport{BlanzEydamHeinemannetal.2022, type = {Working Paper}, author = {Blanz, Alkis and Eydam, Ulrich and Heinemann, Maik and Kalkuhl, Matthias}, title = {Optimal carbon pricing with fluctuating energy prices — emission targeting vs. price targeting}, series = {CEPA Discussion Papers}, journal = {CEPA Discussion Papers}, number = {51}, issn = {2628-653X}, doi = {10.25932/publishup-56104}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-561049}, pages = {12}, year = {2022}, abstract = {Prices of primary energy commodities display marked fluctuations over time. Market-based climate policy instruments (e.g., emissions pricing) create incentives to reduce energy consumption by increasing the user cost of fossil energy. This raises the question of whether climate policy should respond to fluctuations in fossil energy prices? We study this question within an environmental dynamic stochastic general equilibrium (E-DSGE) model calibrated on the German economy. Our results indicate that the welfare implications of dynamic emissions pricing crucially depend on how the revenues are used. When revenues are fully absorbed, a reduction in emissions prices stabilizes the economy in response to energy price shocks. However, when revenues are at least partially recycled, a stable emissions price improves overall welfare. This result is robust to different modeling assumptions.}, language = {en} } @techreport{HaenselFranksKalkuhletal.2021, type = {Working Paper}, author = {H{\"a}nsel, Martin C. and Franks, Max and Kalkuhl, Matthias and Edenhofer, Ottmar}, title = {Optimal carbon taxation and horizontal equity}, series = {CEPA Discussion Papers}, journal = {CEPA Discussion Papers}, number = {28}, issn = {2628-653X}, doi = {10.25932/publishup-49812}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-498128}, pages = {51}, year = {2021}, abstract = {We develop a model of optimal carbon taxation and redistribution taking into account horizontal equity concerns by considering heterogeneous energy efficiencies. By deriving first- and second-best rules for policy instruments including carbon taxes, transfers and energy subsidies, we then investigate analytically how horizontal equity is considered in the social welfare maximizing tax structure. We calibrate the model to German household data and a 30 percent emission reduction goal. Our results show that energy-intensive households should receive more redistributive resources than energy-efficient households if and only if social inequality aversion is sufficiently high. We further find that redistribution of carbon tax revenue via household-specific transfers is the first-best policy. Equal per-capita transfers do not suffer from informational problems, but increase mitigation costs by around 15 percent compared to the first- best for unity inequality aversion. Adding renewable energy subsidies or non-linear energy subsidies, reduces mitigation costs further without relying on observability of households' energy efficiency.}, language = {en} } @phdthesis{Schuetze2020, author = {Sch{\"u}tze, Franziska}, title = {Finance for a sustainable economy}, doi = {10.25932/publishup-48441}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-484415}, school = {Universit{\"a}t Potsdam}, pages = {xi, 128}, year = {2020}, abstract = {With his September 2015 speech "Breaking the tragedy of the horizon", the President of the Central Bank of England, Mark Carney, put climate change on the agenda of financial market regulators. Until then, climate change had been framed mainly as a problem of negative externalities leading to long-term economic costs, which resulted in countries trying to keep the short-term costs of climate action to a minimum. Carney argued that climate change, as well as climate policy, can also lead to short-term financial risks, potentially causing strong adjustments in asset prices. Analysing the effect of a sustainability transition on the financial sector challenges traditional economic and financial analysis and requires a much deeper understanding of the interrelations between climate policy and financial markets. This dissertation thus investigates the implications of climate policy for financial markets as well as the role of financial markets in a transition to a sustainable economy. The approach combines insights from macroeconomic and financial risk analysis. Following an introduction and classification in Chapter 1, Chapter 2 shows a macroeconomic analysis that combines ambitious climate targets (negative externality) with technological innovation (positive externality), adaptive expectations and an investment program, resulting in overall positive macroeconomic outcomes. The analysis also reveals the limitations of climate economic models in their representation of financial markets. Therefore, the subsequent part of this dissertation is concerned with the link between climate policies and financial markets. In Chapter 3, an empirical analysis of stock-market responses to the announcement of climate policy targets is performed to investigate impacts of climate policy on financial markets. Results show that 1) international climate negotiations have an effect on asset prices and 2) investors increasingly recognize transition risks in carbon-intensive investments. In Chapter 4, an analysis of equity markets and the interbank market shows that transition risks can potentially affect a large part of the equity market and that financial interconnections can amplify negative shocks. In Chapter 5, an analysis of mortgage loans shows how information on climate policy and the energy performance of buildings can be integrated into risk management and reflected in interest rates. While costs of climate action have been explored at great depth, this dissertation offers two main contributions. First, it highlights the importance of a green investment program to strengthen the macroeconomic benefits of climate action. Second, it shows different approaches on how to integrate transition risks and opportunities into financial market analysis. Anticipating potential losses and gains in the value of financial assets as early as possible can make the financial system more resilient to transition risks and can stimulate investments into the decarbonization of the economy.}, language = {en} }