Short-Term CO2 Abatement in the European Power Sector

Erik D. Delarue, A. Denny Ellerman and William D. D

08-Jun

This paper focuses on the possibilities for short term abatement in response to a CO₂ price through fuel switching in the European power sector. The model E-Simulate is used to simulate the electricity generation in Europe as a means of both gaining insight into the process of fuel switching and estimating the abatement in the power sector during the first trading period of the European Union Emission Trading Scheme. Abatement is shown to depend not only on the price of allowances, but also and more importantly on the load level of the system and the ratio between natural gas and coal prices. Estimates of the amount of abatement through fuel switching are provided with a lower limit of 35 million metric tons in 2005 and 19 Mtons in 2006.