Carbon dioxide reduction policy comparison in the electricity sector

Ivonne Daniela Viteri, Purdue University

Abstract

The main purpose of renewable energy policies is to reduce CO2 emissions by promoting the deployment of renewable technologies. Since the electricity sector emits more CO2 than any other sectors, these policies will help promote the production of clean electricity. However, producing electricity from renewable energy sources is currently more expensive than conventional technologies, which means that the implementation of renewable policies would incur costs to the society. For this reason it is important to identify which renewable policy can be used to achieve CO2 reductions at a least cost to the society. In this study, three main policies pertinent to electricity markets are analyzed. They are: renewable portfolio standard (RPS), feed in tariff (FIT), and cap and trade (CAT). First of all, by using an economic equilibrium model, the social surplus and CO2 emissions from a perfectly-competitive electricity market are calculated. Then from the application of the different CO2 reduction policies and their requirements, the amount of social surplus reduction per CO2 ton avoided is obtained. Finally the cost to the society of avoiding CO2 ton emissions are derived and analyzed. Such an analysis is to be further extended to consider the effects of endogenous learning on renewable technology development and to model endogenously the impacts (measured in dollar terms) from the increase of CO2 emissions.

Degree

M.S.I.E.

Advisors

Liu, Purdue University.

Subject Area

Environmental management|Industrial engineering|Energy

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