Wind Turbines and Prosperity
The effect on prosperity of investing in North Sea wind power is highly dependent on the value of CO2 emissions. If the ETS works well, the effect on prosperity is negative on balance, as CO2 emissions that have been avoided are not counted. If the ETS does not work well, the effect on prosperity is positive on balance.
SEO Economic Research has carried out research for the Stichting Natuur & Milieu (Nature and Environment Foundation) into the social costs and benefits of investing in North Sea wind power, in particular the undertakings in the Energy Agreement to install an additional 3,450 MW by the end of 2023.
This social cost-benefit analysis (SCBA) differentiates between scenarios for the way the ETS (the European CO2 emissions trading system) operates. If it works well, the CO2 emissions avoided from additional wind power are not counted as an effect on prosperity. In this scenario the financial return on the investment in North Sea wind power is negative, at -2.1 billion euros. Various external effects count positively, however, such as the other emissions avoided (NOx, SO2 and fine particulate matter). Wind power also has a positive effect on security of supply. The SCBA balance with an ETS that works well is negative, at -1.1 billion euros (net cash value).
In scenarios without ETS the CO2 emissions avoided are counted as an effect on prosperity. The value of the CO2 emissions avoided is based on the cost of the damage, which has an upper and lower limit representing the extreme probabilities of climate damage. At the lower limit the balance is positive, at approx. 800 million euros (net cash value); at the upper limit the value is approx. 12 billion euros (net cash value). Investing in wind power could potentially have a major effect on prosperity, as it would prevent an extreme situation where climate damage is very high. The probability of this is small. In the medium scenario for the CO2 value, the SCBA balance is positive, at approx. 5.6 billion euros (net cash value).
The outcome of the SCBA is determined by the price of electricity as well as the value of the CO2 emissions avoided. With a higher price trend the financial return on the investment in North Sea wind power is also positive.
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