Welfare benefits of ambitious climate policy

What are the economic benefits of far-reaching climate policy in the Netherlands? And which technological options are suitable? These are the two central questions examined in a study on costs and benefits of CO2 emission reduction measures conducted for the Dutch Ministry of Infrastructure and the Environment by ECN and SEO Economic Research. The starting point is realization of a CO2 emission reduction of 80% in 2050 compared to 1990. The report indicates which options are cost-effective for realising this objective: energy savings, wind energy, biomass, nuclear energy, CO2 storage and increased deployment of electricity and hydrogen. The direct additional costs for the period 2010-2050 are in the order of 50-70 billion euros, but climate and energy policy also have broader implications for the economy and the reduction of CO2 emissions can be considered a type of welfare benefit. This benefit may rise to over 200 billion euros, but this is uncertain and highly dependent on global developments.

All options needed to be deployed
The main conclusion of this report is that a wide range of options is needed to reduce the emissions drastically at a minimal cost, regardless of the long-term economic expectations. Cost considerations barely reduce the number of suitable options. However, deployment of the lower cost options such as onshore wind and low-cost energy saving may prevent having to use the expensive alternatives (see Figure 1).

Cost and benefits listed
This study lists all social costs and benefits. Next to the direct costs and benefits such as investments in new techniques and saved energy, there are also indirect economic effects in other sectors. The avoided damage of climate change and air pollution have also been mapped, and the reinforcement of the economy due to changes in the structure and enhanced energy security has been quantified.
 



Figure 1: Positioning of a number of reduction options in the cost curve (x-axis: reduction potential in Mton CO2; y-axis: € mln per Mton CO2eq)

The report is available for download (in Dutch).    

 

 

 

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