Equilibrium prices and investment in electricity systems with CO2-emission trading and high shares of renewable energies

Abstract This paper couples two partial equilibrium models of the European electricity market to answer central questions regarding the decarbonisation of electricity systems, especially the interdependencies between the European emission trading scheme and subsidies for renewable energies. We analyse long-term development until 2050 with endogenous consideration of investment decisions in conventional power plants as well as renewable energy technologies. The paper answers central questions such as: can renewable energy sources cover their investment costs in an energy-only market with a sufficiently tight climate protection goal or do they need continuous subsidisation? How far (and how fast) will CO2 prices rise to achieve emission reduction targets of 80% until the year 2050? What is the effect of additional subsidies for renewable energy sources on electricity prices, system costs (costs to society), shares of renewables in the electricity system and climate protection?

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