Department of Economics and Business Economics

Measuring the impact of clean energy production on CO2 abatement in Denmark: Upper bound estimation and forecasting*

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Using annual data from 1978 through 2016, and monthly data from January 2005 through November 2017 from Denmark, we provide a precise estimate of the upper bound on the potential impact of the adoption of wind energy on the reduction of (Formula presented.) emissions from energy production. We separate causal impacts from endogenous effects in regressions using instrumental variables including average wind speed, and from spurious effects in dynamic systems using impulse-response analysis and cointegration techniques. A one percentage point increase in the share of wind in total energy production is found to cause a reduction in (Formula presented.) emissions of the order 0.3%, based on endogeneity-corrected regression, and 0.5% over 2 years in a fractional vector error-correction model, after allowing the cumulative effects to take place. This corresponds to an upper bound estimate of 0.69 tonnes of (Formula presented.) emissions avoided per additional MWh of wind energy produced. We find that after a structural break at the time of introduction of the EU ETS and the Kyoto Protocol in 2005, the country has been on track towards meeting its long-term goals for emission reduction and green energy production, but not before.

Original languageEnglish
JournalJournal of the Royal Statistical Society. Series A: Statistics in Society
Pages (from-to)118-149
Number of pages32
Publication statusPublished - Jan 2021

Bibliographical note

Funding Information:
*We are grateful to David Hendry, Bent Nielsen, Felix Pretis and other participants at the 2nd Conference on the Econometrics of Climate Change, Oxford, for useful comments. We also thank John Cappelen, Danish Meteorological Institute, and Ole‐Kenneth Nielsen, Department of Environmental Science–Emission Modeling and Environmental Geography, Aarhus University, for advice and for allowing access to some of the data used in this study. Research support was provided by the Danish Social Science Research Council and the Center for Research in Econometric Analysis of TimE Series (CREATES), which is funded by the Danish National Research Foundation (grant number DNRF78). The authors declare no competing interests, financially or otherwise, with any organizations or individuals.

Publisher Copyright:
© 2020 Royal Statistical Society

Copyright 2020 Elsevier B.V., All rights reserved.

    Research areas

  • abatement, causal effect, emissions, fractional cointegration, renewable energy

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