An overview of CO2 cost pass-through to electricity prices in Europe
AbstractThis article investigates the link between wholesale electricity prices in Europe and the CO2 cost, i.e. the price of the European Union Allowances (EUA), over the two first phases of the EU ETS. We set up a theoretical and an empirical model to estimate to what extent daily fluctuations of CO2 costs may have impacted electricity prices. Regarding estimation results for the first phase of the EU ETS, about 42% of estimated pass-through rates appear to be statistically significant, while only one third of them are statistically different from zero in the second phase. We try to improve those results by proposing alternatives estimates based on the compliance periods of the EU ETS.
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Bibliographic InfoPaper provided by Chaire Economie du Climat in its series Working Papers with number 1108.
Length: 34 pages
Date of creation: Jun 2011
Date of revision:
EU ETS; CO2 costs pass-through; Electricity prices; Spot markets;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
- G1 - Financial Economics - - General Financial Markets
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-19 (All new papers)
- NEP-ENE-2011-12-19 (Energy Economics)
- NEP-ENV-2011-12-19 (Environmental Economics)
- NEP-EUR-2011-12-19 (Microeconomic European Issues)
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