Reaping the benefits of renewables in a nonoptimal world

07/02/2013 - Upscaling renewable energy technologies such as wind or solar has a number of direct effects – less greenhouse-gas emissions for instance, and lower local air pollution. Economists rightly recommend a well-tailored set of policy instruments such as emissions cap-and-trade for CO2 or SO2 to tackle these effects. However, in a world in which these instruments cannot be implemented effectively – that is reality in some parts of the world – cobenefits of climate policy like reduced local air pollution might be a compelling narrative. This can be actually observed in the US right now. Still, these are not a substitute for efficient policy instruments, argue Ottmar Edenhofer and his colleagues of the Potsdam Institute for Climate Impact Research in a comment to be published in the Proceedings of the National Academy of Sciences (PNAS) this week.
Reaping the benefits of renewables in a nonoptimal world

Cobenefits are positive effects of policies aiming at one objective on other policy objectives. A study bei Siler-Elans et al in that same issue of PNAS quantifies the synergies between renewable energy policy, health and climate protection in the US and demonstrates that they can be optimized if support schemes incorporate regional differences in benefits. “This provides insights for debates also in the European Union, as the discussion of a framework for 2030 opens a window of opportunity here,” says Edenhofer.

However, the concept of cobenefits is not always used appropriately, Edenhofer points out. A renewable policy is only enhancing welfare under specific circumstances, when externalities are not properly addressed by regulations. “The study could be misused by interest groups arguing that subsidizing renewables is a more favorable way to reduce emissions than the pricing of CO2,” says Edenhofer. From an economist’s perspective, “there’s nothing wrong in taking a pragmatic approach, yet it is not sufficient to focus only on cobenefits.” For instance, instruments to incentivize grid investments have to be considered, to fully exploit location advantages of renewable energy generation.


Article: Edenhofer, O., Knopf, B., Luderer, G. (2013): Reaping the benefits of renewables in a nonoptimal world. Proceedings of the National Academy of Sciences [DOI:10.1073/pnas.1310754110]

Weblink to the article once it is published: