3630513
doi
10.1016/j.esr.2019.100373
oai:zenodo.org:3630513
user-eu
user-coacch-co-designing-the-assessment-of-climate-change-costs-h2020-project
Mayer, Jakob
University of Graz
Steininger, Karl
University of Graz
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
University of Graz
info:eu-repo/semantics/openAccess
Creative Commons Attribution 4.0 International
https://creativecommons.org/licenses/by/4.0/legalcode
Climate change mitigation; Electricity; Europe; Risk; Capital costs
<p>To mitigate climate change, societies strive to transform the energy sector towards greenhouse gas emission<br>
neutrality, a move which assessment studies often indicate incurs large macroeconomic costs. In this context the<br>
weighted average costs of capital (WACC) are especially important, as renewables are highly capital intensive. In<br>
particular, investors' perceptions and expectations of risks are fundamental determinants of WACC and thus<br>
strongly influence the macroeconomic outcome of transition analyses. For the case of Europe's electricity sector<br>
transition, we analyze this sensitivity by choosing different WACC settings, driven also by different policy settings<br>
redirecting expectations. First, we find that when differentiating WACC across regions and technologies<br>
more accurately than usually done in the literature, immediate and substantial macroeconomic benefits from the<br>
transition emerge. We thereby reveal a systematic overestimation of low-carbon transition costs in the literature.<br>
Second, we find that when pricing-in increasing trust in renewables, these benefits get significantly larger,<br>
outweighing possible negative macroeconomic effects from the risk of stranding of fossil-based assets. We also<br>
demonstrate that in developed regions such as Europe, de-risking renewables is an effective lever for reaching<br>
climate targets, which indicates the relevance of green macroprudential regulation.</p>
Zenodo
2019-11-01
info:eu-repo/semantics/article
3630512
user-eu
user-coacch-co-designing-the-assessment-of-climate-change-costs-h2020-project
award_title=Transitions pathways and risk analysis for climate change mitigation and adaption strategies; award_number=642260; award_identifiers_scheme=url; award_identifiers_identifier=https://cordis.europa.eu/projects/642260; funder_id=00k4n6c32; funder_name=European Commission;
award_title=CO-designing the Assessment of Climate CHange costs; award_number=776479; award_identifiers_scheme=url; award_identifiers_identifier=https://cordis.europa.eu/projects/776479; funder_id=00k4n6c32; funder_name=European Commission;
1580325648.973038
2492642
md5:a064d26839342ff9731fc6b71c1c2dc6
https://zenodo.org/records/3630513/files/Bachner et al. - 2019 - Costs or benefits Assessing the economy-wide effe.pdf
public