Assessment of climate response policy options using the Global Multi-regional Markal (GMM) model

The implications of key policy measures aimed at reducing global Greenhouse Gas (GHG) emissions through the deployment of advanced and climate-friendly energy fuels and conversion technologies are the focus of this study. The study was performed for the ACROPOLIS Project of the European Commission (EC) and the NCCR-CLIMATE Project. The structural, environmental and economic impacts of a set of selected policies are analysed using the five-region, Global MARKAL Model (GMM). The GMM is a "bottom-up" partialequilibrium engineering model developed at the Paul Scherrer Institut (PSI) using a pricing structure that includes the cost-reducing benefits of Endogenous Technological Learning (ETL). A policy set containing three elements was developed and implemented either individually or in combination. Essential policy elements include: Cap-and-Trade policies imposing a CO2 emission reduction target on the reference energy system; Cap-and-Trade policies that force a minimum share of renewable electricity generation; and Internalisation of External Costs of power generation associated with local pollution. Implementation of a broad range of policies designed to mitigate future GHG emissions and local pollution change the structure and performance of the energy sector, and particularly the structure of the electric-generation sector. Incorporation of flexibility in the climate-response policies leads to significant reductions in energy-system costs and marginal costs of CO2 abatement as well as increasing diffusion of advanced, low-carbon technologies. Significant environmental impacts concerning the local pollution and CO2 emissions reduction over the time period modelled are quantitatively reported; these positive effects are further accelerated when the policy options are applied simultaneously, and these synergistic effects are also quantified.