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Costs or benefits? Assessing the economy-wide effects of the electricity sector's low carbon transition – The role of capital costs, divergent risk perceptions and premiums

Bachner, Gabriel; Mayer, Jakob; Steininger, Karl


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  <identifier identifierType="URL">https://zenodo.org/record/3630513</identifier>
  <creators>
    <creator>
      <creatorName>Bachner, Gabriel</creatorName>
      <givenName>Gabriel</givenName>
      <familyName>Bachner</familyName>
      <affiliation>University of Graz</affiliation>
    </creator>
    <creator>
      <creatorName>Mayer, Jakob</creatorName>
      <givenName>Jakob</givenName>
      <familyName>Mayer</familyName>
      <affiliation>University of Graz</affiliation>
    </creator>
    <creator>
      <creatorName>Steininger, Karl</creatorName>
      <givenName>Karl</givenName>
      <familyName>Steininger</familyName>
      <affiliation>University of Graz</affiliation>
    </creator>
  </creators>
  <titles>
    <title>Costs or benefits? Assessing the economy-wide effects of the electricity sector's low carbon transition – The role of capital costs, divergent risk perceptions and premiums</title>
  </titles>
  <publisher>Zenodo</publisher>
  <publicationYear>2019</publicationYear>
  <subjects>
    <subject>Climate change mitigation; Electricity; Europe; Risk; Capital costs</subject>
  </subjects>
  <dates>
    <date dateType="Issued">2019-11-01</date>
  </dates>
  <language>en</language>
  <resourceType resourceTypeGeneral="JournalArticle"/>
  <alternateIdentifiers>
    <alternateIdentifier alternateIdentifierType="url">https://zenodo.org/record/3630513</alternateIdentifier>
  </alternateIdentifiers>
  <relatedIdentifiers>
    <relatedIdentifier relatedIdentifierType="DOI" relationType="IsIdenticalTo">10.1016/j.esr.2019.100373</relatedIdentifier>
    <relatedIdentifier relatedIdentifierType="URL" relationType="IsPartOf">https://zenodo.org/communities/coacch-co-designing-the-assessment-of-climate-change-costs-h2020-project</relatedIdentifier>
  </relatedIdentifiers>
  <rightsList>
    <rights rightsURI="https://creativecommons.org/licenses/by/4.0/legalcode">Creative Commons Attribution 4.0 International</rights>
    <rights rightsURI="info:eu-repo/semantics/openAccess">Open Access</rights>
  </rightsList>
  <descriptions>
    <description descriptionType="Abstract">&lt;p&gt;To mitigate climate change, societies strive to transform the energy sector towards greenhouse gas emission&lt;br&gt;
neutrality, a move which assessment studies often indicate incurs large macroeconomic costs. In this context the&lt;br&gt;
weighted average costs of capital (WACC) are especially important, as renewables are highly capital intensive. In&lt;br&gt;
particular, investors&amp;#39; perceptions and expectations of risks are fundamental determinants of WACC and thus&lt;br&gt;
strongly influence the macroeconomic outcome of transition analyses. For the case of Europe&amp;#39;s electricity sector&lt;br&gt;
transition, we analyze this sensitivity by choosing different WACC settings, driven also by different policy settings&lt;br&gt;
redirecting expectations. First, we find that when differentiating WACC across regions and technologies&lt;br&gt;
more accurately than usually done in the literature, immediate and substantial macroeconomic benefits from the&lt;br&gt;
transition emerge. We thereby reveal a systematic overestimation of low-carbon transition costs in the literature.&lt;br&gt;
Second, we find that when pricing-in increasing trust in renewables, these benefits get significantly larger,&lt;br&gt;
outweighing possible negative macroeconomic effects from the risk of stranding of fossil-based assets. We also&lt;br&gt;
demonstrate that in developed regions such as Europe, de-risking renewables is an effective lever for reaching&lt;br&gt;
climate targets, which indicates the relevance of green macroprudential regulation.&lt;/p&gt;</description>
  </descriptions>
  <fundingReferences>
    <fundingReference>
      <funderName>European Commission</funderName>
      <funderIdentifier funderIdentifierType="Crossref Funder ID">10.13039/501100000780</funderIdentifier>
      <awardNumber awardURI="info:eu-repo/grantAgreement/EC/H2020/642260/">642260</awardNumber>
      <awardTitle>Transitions pathways and risk analysis for climate change mitigation and adaption strategies</awardTitle>
    </fundingReference>
    <fundingReference>
      <funderName>European Commission</funderName>
      <funderIdentifier funderIdentifierType="Crossref Funder ID">10.13039/501100000780</funderIdentifier>
      <awardNumber awardURI="info:eu-repo/grantAgreement/EC/H2020/776479/">776479</awardNumber>
      <awardTitle>CO-designing the Assessment of Climate CHange costs</awardTitle>
    </fundingReference>
  </fundingReferences>
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