The Economic Effect of Climate Change on Electricity Use – A Case Study from Cyprus
Journal
Economic Policy Paper
Date Issued
December 2012
Author(s)
Abstract
This paper assesses additional electricity requirements and the associated costs in
the Mediterranean island of Cyprus because of projected anthropogenic climate
change. For this purpose an econometric model of electricity demand is used, in
combination with climate projections from a state-of-the-art Global Circulation Model
with a regional focus on the Eastern Mediterranean. Results indicate an increase in
total power needs by the mid-21st century compared to a „no climate change‟ case.
Annual electricity demand is projected to rise by 5.6%, causing annual welfare losses
of up to more than 100 million Euros at 2010 prices. Although additional power
requirements are not very remarkable on an annual basis, climate change is
expected to exacerbate the already existing imbalance between winter and summer
electricity demand. This outlook indicates that a reasonable and cost-effective future
energy path in regions with Mediterranean climate would involve substantial
deployment of solar-powered electricity generation, a zero-carbon energy source that
can meet peak load requirements without increasing the country‟s dependency on
imported fossil fuels. Moreover, this forecast highlights the need for adaptation to
climate change through substantial investments in the improvement of the energy
performance of the Mediterranean building stock.
the Mediterranean island of Cyprus because of projected anthropogenic climate
change. For this purpose an econometric model of electricity demand is used, in
combination with climate projections from a state-of-the-art Global Circulation Model
with a regional focus on the Eastern Mediterranean. Results indicate an increase in
total power needs by the mid-21st century compared to a „no climate change‟ case.
Annual electricity demand is projected to rise by 5.6%, causing annual welfare losses
of up to more than 100 million Euros at 2010 prices. Although additional power
requirements are not very remarkable on an annual basis, climate change is
expected to exacerbate the already existing imbalance between winter and summer
electricity demand. This outlook indicates that a reasonable and cost-effective future
energy path in regions with Mediterranean climate would involve substantial
deployment of solar-powered electricity generation, a zero-carbon energy source that
can meet peak load requirements without increasing the country‟s dependency on
imported fossil fuels. Moreover, this forecast highlights the need for adaptation to
climate change through substantial investments in the improvement of the energy
performance of the Mediterranean building stock.
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