Benefits from increased cooperation and energy trade under CO2 commitments—The Nordic case

Abstract

In this paper, benefits from increasing cross-border cooperation under future CO2 commitments in the Nordic countries are examined and evaluated. Four cooperative strategies are analyzed and valued separately: cross-border electricity trade, cross-border emission-permit trade, the introduction of a trans-Nordic natural gas transmission grid, and, finally, utilization of all these three strategies simultaneously. The valuation is done under varying CO2 commitments and under three different scenarios for future energy demand and technological development. In conducting this analysis, the energy-systems model-generator MARKAL (MARKet ALlocation) was used to model the Nordic energy system. It is shown that all cooperative strategies do lower the abatement costs considerably, especially if the strategy including full cooperation is utilized. In this case, additional costs from meeting CO2 targets may be at least halved for commitments less than 10% reduction until 2050 based on emissions in 1995. No significant difference between low and high CO2 commitments could be observed in the size of the benefits from cooperation, expressed in billions (109) of Swedish crowns. Benefits from cooperation are generally larger for scenarios including relatively higher future energy demand.