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Carbon content of electricity futures in Phase II of the EU ETS

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  • Harrison Fell, Beat Hintermann, and Herman Vollebergh

Abstract

We estimate the relationship between electricity, fuel and carbonpricesinGermany, France, the Netherlands, the Nord Pool market and Spain, using one-year futures for base and peakload prices for the years 2008-2011, corresponding to physical settlement during the second market phase of the EU ETS. We employ a series of estimation methods that allow for an increasing interactionbetweenelectricityand input prices on the one hand, and between electricity markets on the other. The results vary by country due to different generation portfolios. Overall, we find that (a) carbon costs are passed through fully in most countries; (b) under some model specifications, cost pass-through is higher during peakload than during baseload for France, Germany and the Netherlands; and (c) the results are sensitive to the degree of cross-commodity and cross-market interaction allowed.

Suggested Citation

  • Harrison Fell, Beat Hintermann, and Herman Vollebergh, 2015. "Carbon content of electricity futures in Phase II of the EU ETS," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
  • Handle: RePEc:aen:journl:ej36-4-fell
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    Citations

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    Cited by:

    1. Castagneto-Gissey, Giorgio, 2014. "How competitive are EU electricity markets? An assessment of ETS Phase II," Energy Policy, Elsevier, vol. 73(C), pages 278-297.
    2. repec:kap:enreec:v:69:y:2018:i:4:d:10.1007_s10640-016-0096-1 is not listed on IDEAS
    3. repec:eee:jeeman:v:89:y:2018:i:c:p:1-28 is not listed on IDEAS
    4. Herman R. J. Vollebergh & Eric Drissen, 2014. "Unconventional Gas and the European Union: Prospects and Challenges for Competitiveness," CESifo Working Paper Series 5035, CESifo Group Munich.
    5. Meleo, Linda, 2014. "On the determinants of industrial competitiveness: The European Union emission trading scheme and the Italian paper industry," Energy Policy, Elsevier, vol. 74(C), pages 535-546.
    6. Beat Hintermann, 2016. "Pass-Through of CO2 Emission Costs to Hourly Electricity Prices in Germany," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(4), pages 857-891.
    7. Beat Hintermann, 2017. "Market Power in Emission Permit Markets: Theory and Evidence from the EU ETS," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(1), pages 89-112, January.
    8. Beat Hintermann, 2014. "Pass-through of CO2 Emission Costs to Hourly Electricity Prices in Germany," CESifo Working Paper Series 4964, CESifo Group Munich.

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    JEL classification:

    • F0 - International Economics - - General

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