Oil and natural gas prices and greenhouse gas emission mitigation

We use the global energy model TIMER to explore the energy system impacts of exogenously forced low, medium and high hydrocarbon price scenarios, with and without climate policy. We find that without climate policy high hydrocarbon prices drive electricity production from natural gas to coal. In the transport sector, high hydrocarbon prices lead to the introduction of alternative fuels, especially biofuels and coal-based hydrogen. This leads to increased emissions of CO₂. With climate policy, high hydrocarbon prices cause a shift in electricity production from a dominant position of natural gas with carbon capture and sequestration (CCS) to coal-with-CCS, nuclear and wind. In the transport sector, the introduction of hydrogen opens up the possibility of CCS, leading to a higher mitigation potential at the same costs. In a more dynamic simulation of carbon price and oil price interaction the effects might be dampened somewhat.