The Real Substitution Effect of Renewable Electricity: An Empirical Analysis for Germany

Abstract

Renewable electricity is the backbone for a net-zero carbon society. This paper esti- mates the national and international emissions effect of German renewable electricity in the years 2017 to 2019 using a Random Forest algorithm, finding negative but hetero- geneous effects on emissions demand. A fraction of the estimated emission reductions translate into allowance cancellations in the EU ETS and thereby reduce overall long- term emissions.