Implications of the Integration of Environmental Damage in Energy/Environmental Policy Evaluation: An Analysis with the Energy Optimisation Model Markal/Times

Abstract

The objective of this paper is to describe an approach to integrate the possible interactions between environmental targets in an energy system optimisation model, MARKAL/TIMES, so as to allow for an integrated policy evaluation. The environmental problems considered in this study are global warming and local air pollution, both linked to energy production and consumption and their abatement possibilities are interrelated. This explains the choice of a partial equilibrium model for the energy market to study these policy questions. With the damage generated by emissions integrated in its objective function, the model allows to optimally compute trade-offs between environment protection and economic costs. In this paper, the problem is examined from the viewpoint of a national policy maker having to address global warming and local air pollution. The MARKAL/TIMES model and the integration of the externalities are described. The data used for the quantification and the valuation of the externalities linked to the supply and use of energy rely heavily on the ExternE EU project dedicated to the evaluation of the external cost of energy. An application with the Belgian MARKAL/TIMES model is presented.