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The European Union Emissions Trading Scheme and Fuel Efficiency of Fossil Fuel Power Plants in Germany

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  • Robert Germeshausen

Abstract

I investigate the impact of the European Union Emissions Trading Scheme (EU ETS) on fuel efficiency of fossil fuel power plants, using administrative micro data on German power plants from 2003 to 2012. I find positive efficiency effects leading to a decrease in fuel input conditional on output of around 0.3% on average for an increase in carbon cost of €1. A back-of-the-envelope calculation suggests that this reduction in fuel use by fossil fuel power plants due to the introduction of the EU ETS translates into reductions in total annual carbon emissions of about 1.5%–2% within the German energy sector.

Suggested Citation

  • Robert Germeshausen, 2020. "The European Union Emissions Trading Scheme and Fuel Efficiency of Fossil Fuel Power Plants in Germany," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(4), pages 751-777.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/708894
    DOI: 10.1086/708894
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    Cited by:

    1. Bai, Yiyi & Okullo, Samuel J., 2023. "Drivers and pass-through of the EU ETS price: Evidence from the power sector," Energy Economics, Elsevier, vol. 123(C).
    2. Gavarda, Claire & Diethelm, Lukas, 2022. "Lessons from the EU effort sharing decision for supranational climate cooperation: A firm-level analysis," ZEW Discussion Papers 22-042, ZEW - Leibniz Centre for European Economic Research.
    3. Kasper Vrolijk & Misato Sato, 2023. "Quasi-Experimental Evidence on Carbon Pricing," The World Bank Research Observer, World Bank, vol. 38(2), pages 213-248.
    4. Vrolijk, Kasper & Sato, Misato, 2023. "Quasi-experimental evidence on carbon pricing," LSE Research Online Documents on Economics 118404, London School of Economics and Political Science, LSE Library.
    5. Mélanie MARTEN, 2022. "Carbon pricing reform and expectations Evidence from French manufacturing, 2005-2019," THEMA Working Papers 2022-19, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.

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