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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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{
  "inLanguage": {
    "alternateName": "eng", 
    "@type": "Language", 
    "name": "English"
  }, 
  "description": "<p>To mitigate climate change, societies strive to transform the energy sector towards greenhouse gas emission<br>\nneutrality, a move which assessment studies often indicate incurs large macroeconomic costs. In this context the<br>\nweighted average costs of capital (WACC) are especially important, as renewables are highly capital intensive. In<br>\nparticular, investors&#39; perceptions and expectations of risks are fundamental determinants of WACC and thus<br>\nstrongly influence the macroeconomic outcome of transition analyses. For the case of Europe&#39;s electricity sector<br>\ntransition, we analyze this sensitivity by choosing different WACC settings, driven also by different policy settings<br>\nredirecting expectations. First, we find that when differentiating WACC across regions and technologies<br>\nmore accurately than usually done in the literature, immediate and substantial macroeconomic benefits from the<br>\ntransition emerge. We thereby reveal a systematic overestimation of low-carbon transition costs in the literature.<br>\nSecond, we find that when pricing-in increasing trust in renewables, these benefits get significantly larger,<br>\noutweighing possible negative macroeconomic effects from the risk of stranding of fossil-based assets. We also<br>\ndemonstrate that in developed regions such as Europe, de-risking renewables is an effective lever for reaching<br>\nclimate targets, which indicates the relevance of green macroprudential regulation.</p>", 
  "license": "https://creativecommons.org/licenses/by/4.0/legalcode", 
  "creator": [
    {
      "affiliation": "University of Graz", 
      "@type": "Person", 
      "name": "Bachner, Gabriel"
    }, 
    {
      "affiliation": "University of Graz", 
      "@type": "Person", 
      "name": "Mayer, Jakob"
    }, 
    {
      "affiliation": "University of Graz", 
      "@type": "Person", 
      "name": "Steininger, Karl"
    }
  ], 
  "headline": "Costs or benefits? Assessing the economy-wide effects of the electricity sector's low carbon transition \u2013 The role of capital costs, divergent risk perceptions and premiums", 
  "image": "https://zenodo.org/static/img/logos/zenodo-gradient-round.svg", 
  "datePublished": "2019-11-01", 
  "url": "https://zenodo.org/record/3630513", 
  "keywords": [
    "Climate change mitigation; Electricity; Europe; Risk; Capital costs"
  ], 
  "@context": "https://schema.org/", 
  "identifier": "https://doi.org/10.1016/j.esr.2019.100373", 
  "@id": "https://doi.org/10.1016/j.esr.2019.100373", 
  "@type": "ScholarlyArticle", 
  "name": "Costs or benefits? Assessing the economy-wide effects of the electricity sector's low carbon transition \u2013 The role of capital costs, divergent risk perceptions and premiums"
}
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