tive. Keeping this reservation in mind, a comparison of Tables 2 and 3 reveals
important information: While it is not assured that windmills will be competi-
tive as long as cost efficient measures, and here in particular, a tradable permit
system, is implemented, windmills receive a large competitive advantage when
only domestic implementation is allowed.8 The range of estimates for the mar-
ginal reduction costs is 9.7-70$/ton given a cost-efficient implementation of the
Kyoto protocol. In comparison, the range of estimates for the necessary tax to
make wind-based energy-production competitive is 9.2-29.8$/ton. Because the
estimates are positioned within the same range of figures, it is not possible to
establish whether wind-based energy production will become competitive even
when implementing the Kyoto Protocol.
This result could also explain why the EU has been eager to make the costs of
meeting the targets implied by the Kyoto agreement unnecessarily high by ar-
guing for serious restrictions on free trade in CO2-permits. Free trade, under the
best circumstances, could reduce marginal reduction costs significantly and
keep conventional power plants more competitive than renewable energy
sources.
However, the costs of producing energy by use of conventional energy systems
could also change when exposed to greater pressure from competition. In order
to get an idea of this, note that energy-technologies reflect differences in costs
and levels of development and can (as done in Grübler et al., 1999), be placed
into three groups. The mature technology has received widespread usage and
has well known specifications (e.g. combustion gas turbine, gas combined and
conventional coal power plants). Such technologies can be changed or im-
proved under pressure from competition, but both the costs and the general
level of energy efficiency is relative stable. The incremental technologies have
higher costs and exist in niche markets (e.g., biomass power plants, coal com-
bustion cycle power plants, nuclear power plants and wind). They have the po-
8 This comparison is only valid given a number of assumptions: reduction are only covered by
making coal based energy production sufficiently more costly, energy prices are determined by
marginal cost prices, and finally, that windmills are just as effective abroad as in Denmark.
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