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Will Adaptation Delay the Transition to Clean Energy Systems? An Analysis with AD-MERGE

Olivier Bahn, Kelly de Bruin, and Camille Fertel

Year: 2019
Volume: Volume 40
Number: Number 4
DOI: 10.5547/01956574.40.4.obah
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Abstract:
Climate change is one of the greatest environmental challenges facing our planet in the foreseeable future, yet, despite international environmental agreements, global GHG emissions are still increasing. In this context, adaptation measures can play an important role in reducing climate impacts. These measures involve adjustments to economic or social structures to limit the impact of climate change without limiting climate change itself. To assess the interplay of adaptation and mitigation, we develop AD-MERGE, an integrated assessment model that includes both reactive ('flow') and proactive ('stock') adaptation strategies as well as a range of mitigation (energy) technologies. We find that applying adaptation optimally delays but does not prevent the transition to clean energy systems (carbon capture and sequestration systems, nuclear, and renewables). Moreover, applying both adaptation and mitigation is more effective than using just one.



Market Power and Renewables: The Effects of Ownership Transfers

Olivier Bahn, Mario Samano, and Paul Sarkis

Year: 2021
Volume: Volume 42
Number: Number 4
DOI: 10.5547/01956574.42.4.obah
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Abstract:
Adding renewable energy sources (RES) to an electricity market has an ambiguous effect on wholesale prices. The merit order effect (MoE) has a downward pressure on prices while, with market power, higher inframarginal rents will tend to increase prices. We quantify the interaction of the two effects in the Ontario electricity market. We identify the market power effect by simulating transfers of RES capacity from the fringe to larger firms: these transfers increase prices by up to 24%. We then add RES capacity and allocate it to players with varying levels of market power. Following a net expansion of RES capacity of 5% relative to total capacity, prices decrease by 30% when new capacity is assigned to the fringe, but only by 7% when assigned to the largest firm. Our findings show that the MoE is largely mitigated by market power, hence the importance of the market structure in the design of uniform incentives for RES adoption.





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