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CREE - Oslo Center for Research on Environmentally friendly Energy

Awarded: NOK 64.0 mill.

CREEs projects are divided into four flagships, each addressing a key topic within environmentally friendly energy. Flagship I: Radical emissions reductions in ETS sectors We have studied how energy markets should be regulated and how measures should be designed in order to promote green energy. In particular, we have examined whether Norway can act as a green battery for Europe. This would require significant price variation between Norway and the Continent as well as huge transmission capacity. We have documented that demand for electricity can be met by a suitable combination of wind power, solar and batteries. The purpose of the storage technology is to smooth out the time profiles of intermittent electricity supply and consumption. EU policy, in particular the Energy Union, aims at integrating the European electricity markets. We have shown that such a goal would require adjustments of the current market design in order to handle large variations in wind and solar power. We have also examined whether wind and solar power, supplemented by batteries, can cover the entire electricity supply in Europe. Flagship II: Environmentally friendly transport A key policy question within the field of environmentally friendly transport is whether electrical vehicles should be supported. It has been argued that this type of policy is not a cost efficient way to reduce GHG emissions. We have, however, shown in a theoretical study that high subsidies to electrical vehicles, or temporary high taxes on fossil-based cars, might be beneficial for society.This is due to positive network externalities. We have also studied standards for speed loading. Currently, there are three standards - Combo, Chademo and AC 43 - in addition to the Tesla standard. Different standards lead to less access to loading stations for each owner of an electrical vehicle, thereby affecting the development of electric cars negatively. The theory analysis are supplemented with empirical studies, including examination of transport policy instruments like i) higher toll payment in cities, ii) cheaper tickets for public transport in rural areas, and iii) higher prices for automotive diesel oil. Each of these measures might improve the environment along some dimensions, like lower emissions of CO2, but harm the environment along other dimensions, like deterioration of local air quality. Hence, it is hard to design a package of instruments that will improve the environment along all dimensions. Flagship III: Environmental regulations and utilization of smart technologies Radical emissions reductions require development of climate-friendly technologies. One unconventional R&D instrument is an innovation prize, that is, the actor receives an amount of money from the regulator/government if he succeeds in developing a new technology that meets some pre-specified technical conditions. We have shown that the regulator can design an innovation prize that provides the correct social incentives to undertake R&D. We have examined different types of R&D support for CCS (carbon capture and storage), and asked whether this should take the form of support to development of CCS technologies or purchase of CCS technologies. Our conclusion is that we should support development of the CCS technology. Another major activity has been to study empirically how environmental regulations may trigger more environmentally friendly R&D, measured by number of patents. Here, we draw on a rich Norwegian panel data set that includes information about the type and number of patent applications, technology standards, non-tradable emission quotas, and a large number of control variables. We identify strong and significant effects on innovations from the implicit regulatory costs of direct environmental regulations. Economists normally argue that putting a tax on carbon emissions is the single most important instrument for tackling climate change. Moreover, although most economists agree that research and development of new carbon-free technologies should be subsidized, few advocate prioritizing public R&D funds for clean technologies. This view has, however, recently been challenged in the literature linking climate and R&D policy. We have examined under what circumstances governments should actively direct research effort away from dirty technologies into clean technologies. Our results suggest that when dealing with major environmental problems, government should prioritize clean R&D. Flagship IV: Towards the low-emission society This flagship covers three topics; strategies to greening the economy, national and international climate policy and agreements, and barriers and opportunities in green transformation. We have studied climate agreements that can be re-negotiated when not all aspects of the agreement are contractible. Such an agreement provides incentives for several countries to commit to radical emissions reductions.

Through 203 publications in peer reviewed international journals, CREE has had powerful impact on the academic world. The CREE centre has triggered interdisciplinary research, mainly as cooperation between i)economists and social anthropologists, and ii)economists and technology experts, but also with contributions from political science, law and psychology to complement the economic perspective. CREE organized various user-oriented activities, including an annual half-day seminar, joint with the FME-S centre CICEP, for user partners on topics of mutual interest, and the innovative arrangement CREE Hot Line. While the main objective of CREE was to improve the general knowledge base for policy design, CREE researchers have also contributed through various deliveries to Norwegian ministry publications, in particular, the Green Tax Commission, Stortingsmelding 25 (2015-2016), and Stortingsmelding 41 (2016-2017); participation in expert groups, both in Norway and IPCC; and Klimakur.

To a large extent, energy and climate policy is focused on how to develop and utilize new technology and more environmentally friendly energy sources. This does not occur by itself, but instead is dependent on institutional and economic frameworks. In thi s regard, CREE will contribute to the collection and establishment of knowledge on how framework conditions affect both the energy market and technological development, including innovation and the diffusion of technology for renewable energy, energy effi ciency and carbon capture and storage. The center will work on developing better framework conditions and policy instruments designed to reach the goals established in national and international energy and climate policy. The work of CREE will thus be hig hly relevant for our user partners, which consist of Norwegian policy makers, regulators and important agents in the energy market. CREE will work with all of the issues mentioned in the announcement. We will further develop our methodological framework and use it to analyze problems in relation to the design of policy instruments, markets and regulation, international energy and climate policy, as well as innovation and diffusion. Our research will primarily be grounded in economics - for which our rese arch partners will be the Department of Economics (University of Oslo), the Research Department (Statistics Norway), the Frisch Centre and the Tilburg Sustainability Center - but will also draw on other disciplinary perspective, such as technology (IFE an d SINTEF Energy), political science, social anthropology and law (all from the MILEN network at the University of Oslo and Tilburg Sustainability Center)

Publications from Cristin

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