Climate change policy and its effect on market power in the gas market
AbstractThe European Emissions Trading Scheme (ETS) limits CO2 emissions from covered sectors, especially electricity until December 2007, after which a new set of Allowances will be issued. The paper demonstrates that the impact of controlling the quantity rather than the price of carbon is to reduce the elasticity of demand for gas, amplifying the market power of gas suppliers, and also amplifying the impact of gas price increases on the price of electricity. A rough estimate using just British data suggests that this could increase gas market power by 50%.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0606.
Date of creation: Feb 2006
Date of revision:
Contact details of provider:
Web page: http://www.econ.cam.ac.uk/index.htm
Climate change; emissions trading; market power; gas; quotas vs taxes;
Other versions of this item:
- David M. Newbery, 2008. "Climate Change Policy and Its Effect on Market Power in the Gas Market," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 727-751, 06.
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-19 (All new papers)
- NEP-COM-2006-02-19 (Industrial Competition)
- NEP-ENE-2006-02-19 (Energy Economics)
- NEP-ENV-2006-02-19 (Environmental Economics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Colm McCarthy & Jeremiah O'Dwyer & Richard Troy, 2006. "Measuring Fuel Diversity in Power Generation," Working Papers 200618, School Of Economics, University College Dublin.
- Rolf Golombek & Sverre A.C. Kittelsen & Knut Einar Rosendahl, 2011.
"Price and welfare effects of emission quota allocation,"
661, Research Department of Statistics Norway.
- Golombek, Rolf & Kittelsen, Sverre A.C. & Rosendahl, Knut Einar, 2013. "Price and welfare effects of emission quota allocation," Energy Economics, Elsevier, vol. 36(C), pages 568-580.
- Roques, Fabien A. & Newbery, David M. & Nuttall, William J., 2008. "Fuel mix diversification incentives in liberalized electricity markets: A Mean-Variance Portfolio theory approach," Energy Economics, Elsevier, vol. 30(4), pages 1831-1849, July.
- Colm McCarthy & Sue Scott, 2008.
"Controlling the Cost of Controlling the Climate: The Irish Government's Climate Change Strategy,"
WP229, Economic and Social Research Institute (ESRI).
- Colm McCarthy & Sue Scott, 2008. "Controlling the Cost of Controlling the Climate - The Irish Government’s Climate Change Strategy," Working Papers 200807, School Of Economics, University College Dublin.
- Chevallier, Julien & Etner, Johanna & Jouvet, Pierre-André, 2011.
"Bankable emission permits under uncertainty and optimal risk-management rules,"
Research in Economics,
Elsevier, vol. 65(4), pages 332-339, December.
- Chevallier, Julien & Etner, Johanna & Jouvet, Pierre-André, 2011. "Bankable emission permits under uncertainty and optimal risk-management rules," Economics Papers from University Paris Dauphine 123456789/5385, Paris Dauphine University.
- Zhang, Qiong & Yang, Hangjun & Wang, Qiang & Zhang, Anming, 2014. "Market power and its determinants in the Chinese airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 64(C), pages 1-13.
- Fridrik Baldursson & Nils-Henrik Fehr, 2012.
"Price Volatility and Risk Exposure: On the Interaction of Quota and Product Markets,"
Environmental & Resource Economics,
European Association of Environmental and Resource Economists, vol. 52(2), pages 213-233, June.
- Baldursson, Fridrik M. & Fehr, Nils-Henrik M. von der, 2009. "Price volatility and risk exposure: on the interaction of quota and product markets," MPRA Paper 14994, University Library of Munich, Germany.
- Baldursson, Fridrik M. & von der Fehr, Nils-Henrik M., 2009. "Price Volatility and Risk Exposure: on the Interaction of Quota and Product Markets," Memorandum 11/2009, Oslo University, Department of Economics.
- Asproudis, Elias & Weyman-Jones, Tom, 2011. "Third parties �participation in tradable permits market. Do we need them?," MPRA Paper 28766, University Library of Munich, Germany.
- Roques, F.A., 2007.
"Technology Choices for New Entrants in Liberalised Markets: The Value of Operating Flexibility and Contractual Arrangements,"
Cambridge Working Papers in Economics
0759, Faculty of Economics, University of Cambridge.
- Roques, Fabien A., 2008. "Technology choices for new entrants in liberalized markets: The value of operating flexibility and contractual arrangements," Utilities Policy, Elsevier, vol. 16(4), pages 245-253, December.
- Julien Chevallier & Johanna Etner & Pierre-André Jouvet, 2008. "Bankable Pollution Permits under Uncertainty and Optimal Risk Management Rules: Theory and Empirical Evidence," EconomiX Working Papers 2008-25, University of Paris West - Nanterre la Défense, EconomiX.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Howard Cobb).
If references are entirely missing, you can add them using this form.