Firing the Furnace? – An Econometric Analysis of Utilities’ Fuel Choice
AbstractThis paper attempts to predict the potential effects of CO2 emissions trading on fuel choice in the German electric power industry. By analyzing panel data (1968–1998) of major utilities, we show that the fuel mix of electric utilities is price inelastic. As a consequence, the implementation of a CO2 trading scheme will, if anything, only slightly induce interfuel substitution. Accordingly, low-carbon fuels will hardly replace lignite and hard coal through CO2 emissions trading, as long as abatement targets are not extremely ambitious. However,one cannot rule out that fuel prices may become more important for the utilities’ fuel mix as a result of deregulation in the German power sector.
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Bibliographic InfoPaper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung in its series RWI Discussion Papers with number 0017.
Length: 28 pages
Date of creation: Jul 2004
Date of revision:
Other versions of this item:
- Tauchmann, H., 2006. "Firing the furnace? An econometric analysis of utilities' fuel choice," Energy Policy, Elsevier, vol. 34(18), pages 3898-3909, December.
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
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