Integrating policy instruments into energy system models-from theory to application to Germany

Abstract

This chapter provides an overview of the use of bottom-up energy system models to evaluate the long-term effects of energy and climate policyinstruments. The major benefits of this type of model for policy evaluation are theinclusion of all interactions within the energy system as well as the high level oftechnological detail. Progress, on the other hand, needs to be made in terms of therepresentation of the decision-making behavior of different economic agents and theinclusion of macroeconomic feedbacks. Flexible, endogenous modelling approachesfor two important instrument categories are then outlined and applied to a casestudy on the German energy system: emissions trading systems and differentsupport systems for renewable electricity. This scenario analysis shows how theexplicit modelling of policy instruments in energy system models can providequantitative policy insights, e.g. to analyze the interaction between different typesof instruments or to compare alternative policy mechanisms which can be appliedfor the same political target.