The role of renewable energy in Portugal´s decarbonisation strategy – application of the HyBGEM model

Energy is a critical factor not only to economic growth and to achieve a less dependent and more competitive economy but also to promote sustainable growth towards to a highly energyefficient, low-carbon economy. Energy-economic-environment interactions therefore play a crucial role in driving the climate change mitigation and growth policies. The evidence of this is, in particular, the recent adoption by the European Union of an integrated climate and energy policy, by defining ambitious targets for 2020: i) cut its greenhouse gas emissions by 20% from 1990 levels (or even 30% in case an international agreement is reached that commits other countries in a similar way), ii) produce 20% of its energy supply from renewable energy sources, and iii) cut energy consumption through improved energy efficiency by 20% – is the so-called 20/20/20 targets under the EU Climate and Energy Package. In this paper we intend to assess the role of renewable energy sources in Portugal´s decarbonisation strategy up to 2020. This question is of practical relevance for national decision–making on climate and energy policies. In our policy simulations, we make use of the Hybrid Bottom-up General Equilibrium Model (HyBGEM) for Portugal – a hybrid multi-sector E3 general equilibrium model formulated as a mixed complementarity problem, which integrates bottom-up activity analysis into a top-down CGE framework through the detailed technological representation of the electricity sector. HyBGEM is numerically implemented as a system of simultaneous non-linear inequalities using MPSGE (Mathematical Programming System for General Equilibrium analysis) as a subsystem within GAMS (General Algebraic Modelling System), and solved by using the PATH solver. Preliminary results suggest that both the imposition of CO2 emissions constraints and the subsidization of renewable power generation technologies through a feed-in tariffs (FITs) system have a similar impact on overall national CO2 emissions. This is an interesting result because it indicates that the decrease of carbon emissions resulting from achieving the national RES-E target for 2020 also meets the national CO2 reduction target. The promotion of renewable electricity generation is therefore crucial in the decarbonisation strategy of the Portuguese economy