16 May 2011

Distributional Consequences of Climate Change Impacts on the Power Sector: Who gains and who loses?

Dirk Rübbelke / Stefan Vögele

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Climate change tends to negatively affect the power sector, inter alia, by causing cooling problems in power plants and impairing the water supply required for hydro-power generation. In future, when global warming is expected to increase, autonomous adaptation to climate change via international electricity markets inducing reallocations of power generation may not be sufficient to prevent supply disruptions. Furthermore, the consequent changes of supply patterns and electricity prices might cause an undesirable redistribution of wealth both between individual power suppliers and between suppliers and consumers. This study ascertains changes in European power supply patterns and electricity prices caused by ongoing global warming as well as related redistribution of wealth for different climate change scenarios. Our results confirm that autonomous adaptation in the power sector should be complemented by planned public adaptation in order to preserve energy security and to prevent undesired distributional effects.

Dirk Rübbelke is an Economist at the Basque Centre for Climate Change (BC3) and Research Professor at the Basque Foundation for Science in Bilbao. Stefan Vögele is a researcher at Forschungszentrum Jülich GmbH, Institute of Energy and Climate Research – Systems Analysis and Technology Evaluation (IEK-STE), Jülich, Germany