Internalisation of external cost in the power generation sector: Analysis with Global Multi-regional MARKAL Model

The Global MARKAL-Model (GMM), a multi-regional "bottom-up" partial equilibrium model of the global energy system with endogenous technological learning, is used to address impacts of internalisation of external costs from power production. This modelling approach imposes additional charges on electricity generation, which reflect the costs of environmental and health damages from local pollutants (SO2, NOx) and climate change, wastes, occupational health, risk of accidents, noise and others. Technologies allowing capturing of pollutants emitted from power plants are introduced into the energy system, for example desulphurisation, NOx removal, and CO2 scrubbers. The model indicates substantial changes in the electricity production system (new technologies penetration and fuel switching), caused by internalisation of external costs and also efficiency loss due to the use of scrubbers. There is significant environmental impact concerning the local pollution and CO2 emissions reduction over the whole modelled time period. Finally, the detailed analysis of the total generation cost of different technologies including the effect of internalisation of external cost has been performed in order to evaluate the competitiveness of present and future energy systems.