Short-term distributional consequences of climate change impacts on the power sector: who gains and who loses?

Climate change tends to negatively affect the power sector, inter alia, by causing cooling problems in power plants and impairing the water supply required for hydropower generation. In the future, when global warming is expected to increase, autonomous adaptation to climate change via international electricity markets inducing reallocations of power generation may not be sufficient to prevent supply disruptions anymore. Furthermore, the consequent changes of supply patterns and electricity prices might cause an undesirable redistribution of wealth both between individual power suppliers and between suppliers and consumers. This study ascertains changes in European power supply patterns and electricity prices caused by on-going global warming as well as the associated redistribution of wealth for different climate change scenarios. The focus of the analysis is on short-term effects. Our results confirm that autonomous adaptation in the power sector should be complemented by planned public adaptation in order to preserve energy security and to prevent undesired distributional effects.