Decarbonizing Energy Systems – Technological and Policy Challenges in Addressing Multiple Benefits
The workshop aims to further develop the methodological approaches for capturing and evaluating multiple effects of energy system decarbonisation and for assessing the implications of different features of the effects on strategic behaviour of agents. These approaches include multi-criteria decision analysis (MCDA) and the aggregative game approach. When analysing decarbonisation policies, a distinction must be made between primary effects/benefits and co-effects/benefits of these policies.
The primary goal of such decarbonisation policies is the combatting of climate change. Combatting climate change has the properties of a global public good (Buchholz and Sandler 2021) which is provided at a socially suboptimal low level. Undersupply of public goods is a serious problem in different fields going beyond the environmental sphere (e.g. it also occurs concerning health issues (Sandler and Arce M. 2002) and different dimensions of security (e.g. Frey et al. 2009). This undersupply problem is evoked by the nature of public goods, which is characterized by non-excludability of and non-rivalry in the consumption of public goods. Due to these characteristics, free-rider incentives are immanent to the voluntary provision of public goods and individual agents will not supply a socially efficient level of these goods (see, e.g. Cornes and Sandler 1996).
In particular challenging is the efficient provision of global public goods like the combat of climate change because no central governmental authority exists globally, that could enforce a socially efficient provision of such public goods. Therefore, an improvement of public good supply is sought via international voluntary negotiations between countries. The strategic nature of these negotiations can only be fully understood when all relevant aspects are taken into account and this includes the consideration of co-effects.
Co-Effects or Ancillary Effects
All benefits - other than the primary benefits - jointly arising from decarbonisation measures (e.g. the reducing of the burning of fossil fuels), are called ancillary benefits, co-benefits or secondary benefits. These terms are frequently used synonymously and so do we in this proposal (see e.g. Markandya and Rübbelke 2004 for a classification of terms). The research on co-benefits of climate policy has its origins in the early 1990s (see e.g. Ayres and Walter 1991). Initially there has been a focus on the co-benefits of climate change mitigation policy and only in the recent years we observe a rising interest in adaptation co-benefits (e.g. Reif and Osberghaus 2020).
Ancillary benefits or co-benefits of climate policy are of considerable size. In a survey of studies concerning air-quality-related ancillary benefits, Nemet et al. (2010) state that these co-benefits are of a similar order of magnitude as greenhouse gas abatement costs. More recent studies also confirm the importance of such benefits (Bain et al. 2016, Dimanchev et al. 2019, Karlsson et al. 2020).
Ancillary benefits exhibit features that are regularly distinct from those of primary effects. A prominent example of co-effects is the improvement in local air quality through the use of low-emission technologies. Other ancillary benefit categories include, e.g. traffic-related benefits (e.g. from reduced noise), benefits of the prevention of soil erosion and biodiversity loss. Sometimes all sustainable development effects (beyond the climate change issue) are understood as co-effects, see e.g. Campagnolo and de Cian (2020) and Vögele and Govorukha (2022). In the related literature reference is frequently made to the UN Sustainable Development Goals and positive and adverse effects of climate policy on attaining these goals are considered.
Due to the multiplicity of relevant co-benefits, it makes a lot of sense to consider co-benefits as a broader ‘umbrella’ concept (also see Mayrhofer and Gupta 2016).
Many of the co-effects associated with it can be classified as private goods for the country where the climate protection project is hosted (Pittel and Rübbelke 2008, Buchholz et al. 2020). The reduction in emissions of pollutants like particular matter, for example, that is induced by cleaner energy technologies additional to the reduction of CO2 has beneficial effects mainly locally.
Another importance difference between primary and ancillary benefits is that while primary benefits tend to arise to a large extent in the longer term (see e.g. Buchholz and Rübbelke 2022), ancillary benefits regularly occur immediately after the execution of climate policy. Therefore, problems associated with the discounting of future benefits are attenuated in the case of co-benefits.
Impure Public Goods:
Capturing Benefits and Strategic Implications Due to the joint production of public and private (from a decarbonizing country’s point of view) characteristics, decarbonisation policies can be understood as an impure public good (IPG).
Some effects may generate knock-on effects and international spillovers. So, positive co-effects on clean water (SDG 6) tends to have implication for SDG 1 (concerning poverty eradication). Effects may spill over to other countries, as we could show in a recent study on co-effects of the coal-phase out in Germany (Vögele et al. 2022). Coal exporting countries like Russia and Australia are indirectly affected by this phase-out. The impacts on sustainable developing countries are partly negative but partly also positive. Furthermore, sustainable-development effects imposed on China as a major supplier of technologies (like solar energy technologies) that will replace coal-fired power plants were assessed. In the case of China, there was also a mixed picture concerning the effect of the German phase-out: some are supportive of sustainable development, some are not.
Such links between climate policy and sustainable development are particularly important as the UN 2030 Agenda for Sustainable Development with its Sustainable Development Goals (SDGs) and the Paris Agreement, both were adopted in 2015 jointly establish a global agenda for sustainable development and climate action. The scheduled actions under the Paris Agreement could contribute to achieving the diverse 17 SDGs (UN 2015), but trade-offs between objectives tend to arise in different ways.
One of the areas where the importance of co-benefits has been re-emphasised recently and where they have strategic implications is that concerned with Article 6 of the Paris Agreement, where international cooperative approaches are addressed. One challenge in this context is how to distinguish between and to treat local and global effects of climate policies when international climate transfers are to be granted. The Clean Development Mechanism and its prospective successor (in line with the Paris Agreement) explicitly pursue a dual goal by attaining cost-effective global mitigation and assisting developing countries in achieving local sustainable development, for example. However, transfer payers and receivers tend to put different weights on local vs. global benefits.
In economic theory, the impure public good (IPG) approach developed by Cornes and Sandler (1984, 1994), which reverts to Lancaster’s (1966) characteristic approach is a powerful tool to analyse climate policies exhibiting effects of different degrees of publicness. By extending (e.g. by using the aggregative game approach, see Cornes and Hartley (2007), Buchholz et al. (2011) and Hartley (2019)) and applying the IPG theory to new research questions in the field of climate policy and by using game theoretical tools, such as the aggregative game approach, the workshop can make an important contribution to further develop the IPG model. A key challenge for the application of the standard IPG approaches to real-world decision problems is that it requires detailed information about the specific effects of policy measures. Furthermore, these effects must be expressed in a uniform metrics (e.g. monetary evaluation). In practice, the monetary assessment of the various effects of climate policy is often difficult to implement, or prohibitively costly. In this case, decision-making approaches can be used, because they do not require a uniform evaluation of all decision factors. For this purpose, at the workshop we will seek to link approaches of multi-criteria decision analysis (MCDA) with (other) IPG approaches. The workshop will contribute to efforts to extend existing MCDA methods to develop a multi-regional analysis procedure that enables the modelling of conflicts of interests of various actors, for example. This would allow for a complementary consideration of strategic decision problems by game-theoretical and multi-criteria methods.
Der Workshop wird am 11. und 12. Januar 2023 stattfinden.
Das Programm des Workshops finden Sie hier.
Für weitere Fragen wenden Sie sich bitte an:
Dirk [dot] Ruebbelkevwl [dot] tu-freiberg [dot] de (Prof. Dr. Dirk Rübbelke)