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

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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.

Additional information is available for the following registered author(s):

Karsten Neuhoff

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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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
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Handle: RePEc:cam:camdae:0444

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Find related papers by JEL classification:
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing
F18 - International Economics - - Trade - - - Trade and Environment
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

This paper has been announced in the following NEP Reports:

NEP-ALL-2004-09-30 (All new papers)
NEP-ENE-2004-09-30 (Energy Economics)
NEP-RES-2004-09-30 (Resource Economics)

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

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. [Downloadable!]
Yihsu Chen & Jos Sijm & Benjamin Hobbs & Wietze Lise, 2008. "Implications of CO2 emissions trading for short-run electricity market outcomes in northwest Europe," Journal of Regulatory Economics, Springer, vol. 34(3), pages 251-281, December. [Downloadable!] (restricted)
Knut Einar Rosendahl, 2007. "Incentives and quota prices in an emission trading scheme with updating," Discussion Papers 495, Research Department of Statistics Norway. [Downloadable!]
Neuhoff, K. & Ehrenmann, A. & Butler, L. & Cust, J. & Hoexter, H. & Keats, K. & Kreczko,A. & Sinden, G., 2006. "Space and Time: Wind in an Investment Planning Model," Cambridge Working Papers in Economics 0620, Faculty of Economics, University of Cambridge. [Downloadable!]
Other versions:
- 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. [Downloadable!] (restricted)

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