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CO2 trade and market power in the EU electricity sector

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Author Info

  • Svendsen, Gert Tinggaard

    ()
    (Department of Economics, Aarhus School of Business)

  • Vesterdal, Morten

    (Atel Trading, Switzerland)

Abstract

The EU commission is planning to launch an emission trading market for greenhouse gases within near future. This to meet its obligations under the United Nations Framework Convention on Climate Change and the Kyoto Protocol. After a theoretical discussion on market power in such a market, we turn to the empirical evidence which suggests that a reasonable number of sources of CO2 emissions in the power sector exists for boilers larger than 25MW. Overall, together with the contestable single market for electricity, the risk of significant strategic behaviour seems negligible. Thus, the electric utility sector seems a suitable testing ground for an EU-scheme of emissions trading. In the longer run, it will be important to broaden the scope of the trading scheme as the inclusion of other sectors will further limit the risk of market power.

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File URL: http://www.hha.dk/nat/WPER/02-11_gts.pdf
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Bibliographic Info

Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 02-11.

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Length: 17 pages
Date of creation: 07 May 2002
Date of revision:
Handle: RePEc:hhs:aareco:2002_011

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Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Phone: +45 89 486396
Fax: +45 8615 5175
Web page: http://www.asb.dk/departments/nat.aspx
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Related research

Keywords: European Union; energy economics and policy; greenhouse gases; CO2; permit market; market power; Kyoto protocol; electricity sector;

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  1. Peter Cramton & Suzi Kerr, 2002. "Tradeable Carbon Permit Auctions: How and Why to Auction Not Grandfather," Papers of Peter Cramton 02eptc, University of Maryland, Department of Economics - Peter Cramton, revised 06 May 2002.
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Cited by:
  1. Karl-Martin Ehrhart & Christian Hoppe & Ralf Löschel, 2008. "Abuse of EU Emissions Trading for Tacit Collusion," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(3), pages 347-361, November.

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