Table 6: Energy technologies for power generation in the EU – moderate fuel price scenario Source: European Commission (2008)
Kg CO2
Life cycle emissions eq/MWh
640 420 145
690
585 820
270 960 855
270 15
21-42 6-245 11 14 6 6
45 135d
Fuel price sensitivity
Very high Very high Very high
Very high
Very high Medium
Medium Medium Medium
Medium Low
Medium Medium
Nil Nil Nil Low
a. Assuming fuel prices as in “European Energy and Transport: Trends to 2030 – Update 2007” (barrel of oil US$ 54.5 (US$-2005) in 2007 and US$ 63 (US$-2005) in 2030). b. Calculated assuming base load operation. c. Reported efficiencies for carbon capture plants refer to first-of-a-kind demonstration installations that start operating in 2015. d. Assuming the use of natural gas for backup heat production.
full range of externalities from carbon emissions such as air pollution-related health hazards were included in carbon pricing, the relative position of renewable energy would be strengthened considerably. Minimum standards on fossil-fuel plants, which would raise the production costs of fossil fuels, could also increase the competitiveness of renewable energy.
The competitive position of renewable energy would be strengthened if subsidies for fossil fuels were also phased out. In many developing countries, government support to the energy sector is used to decrease the price of energy consumption to below market levels in the belief that this will reduce poverty and spur economic growth. Economically, the most efficient approach to making renewable energy attractive for large-scale market penetration is to remove all subsidies on fossil fuel and impose a price on carbon (for example through fossil-fuel taxes), and then to use the proceeds to subsidise renewable energy for a set duration and to
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provide targeted subsidies to poor households. Phasing out fossil-fuel subsidies is difficult because doing so has impacts throughout the economy and affects those with vested interests. Any politically-viable reform would thus have to be well planned and probably phased in gradually.
Using a price-gap methodology, IEA estimated that fossil-fuel-related consumption subsidies amounted to US$ 342 billion in 2007 (IEA 2010d), US$ 557 billion in 2008 (IEA, OPEC, OECD and World Bank 2010), when fossil-fuel prices rose to particularly high levels, and US$ 312 billion in 2009 (IEA 2010d). Subsidies for producers of fossil fuels are estimated to be in the order of US$ 100 billion per year (GSI 2009). This support, totalling approximately US$ 500-700 billion per year, for conventional energy (mostly fossil fuels) creates an uneven playing field for the adoption of renewable energy. By comparison, the IEA (2010d) estimated government support for electricity from renewables and