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Allocation of Carbon Emission Certificates in the Power Sector: How generators profit from grandfathered rights

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  • Keats, K. Martinez
  • Neuhoff, K.

Abstract

To meet its Kyoto requirements, the EU will establish an internal market for carbon dioxide allowances from 2005, the EU Emissions Trading Scheme (ETS). National governments are to allocate most of these allowances for free. The analysis shows that as a result the net value of both a typical pulverised coal-fired (PC) power station and a more modern gas-fired combined cycle gas turbine (CCGT) will increase. We show that in future allocation rounds a greater proportion of allowances can and should be auctioned. The paper also analyses the interactions with the Large Combustion Plant Directive, which limits SO2 and NOx emissions

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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0444.

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Length: 24
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:cam:camdae:0444

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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: electricity generation; eu emission trading; allocation; updating; grandfathering;

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Cited by:
  1. Knut Einar Rosendahl, 2007. "Incentives and quota prices in an emission trading scheme with updating," Discussion Papers 495, Research Department of Statistics Norway.
  2. Pablo del Río & Javier Carrillo-Hermosilla & Totti Könnölä & Carlos Suárez, 2008. "Challenges and opportunities of a post-Kyoto mitigation regime: a survey of the European electricity sector," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 13(8), pages 863-885, October.
  3. Yihsu Chen & Jos Sijm & Benjamin Hobbs & Wietze Lise, 2008. "Implications of CO 2 emissions trading for short-run electricity market outcomes in northwest Europe," Journal of Regulatory Economics, Springer, vol. 34(3), pages 251-281, December.
  4. Neuhoff, Karsten & Ehrenmann, Andreas & Butler, Lucy & Cust, Jim & Hoexter, Harriet & Keats, Kim & Kreczko, Adam & Sinden, Graham, 2008. "Space and time: Wind in an investment planning model," Energy Economics, Elsevier, vol. 30(4), pages 1990-2008, July.
  5. Schleich, Joachim & Rogge, Karoline S. & Betz, Regina, 2008. "Incentives for energy efficiency in the EU Emissions Trading Scheme," Working Papers "Sustainability and Innovation" S2/2008, Fraunhofer Institute for Systems and Innovation Research (ISI).
  6. Knut Rosendahl & Halvor Storrøsten, 2011. "Emissions Trading with Updated Allocation: Effects on Entry/Exit and Distribution," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 49(2), pages 243-261, June.
  7. Butler, L. & Neuhoff, K., 2005. "Comparison of Feed in Tariff, Quota and Auction Mechanisms to Support Wind Power Development," Cambridge Working Papers in Economics 0503, Faculty of Economics, University of Cambridge.
  8. Rogge, Karoline S. & Hoffmann, Volker H., 2009. "The impact of the EU ETS on the sectoral innovation system for power generation technologies: findings for Germany," Working Papers "Sustainability and Innovation" S2/2009, Fraunhofer Institute for Systems and Innovation Research (ISI).

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