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Discrimination against Newcomers: Impacts of the German Emission Trading Regime on the Electricity Sector

  • Bode, Sven
  • Hübl, Lothar
  • Schaffner, Joey
  • Twelemann, Sven
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    The EU Directive 2003/87/EC for the introduction of a European emission trading system has left the task of allocating the emission allowances mainly to the member states. In Germany the details of the allocation method are laid down in the Allocation Act (ZuG 2007). One central element of the Allocation Act is the so called transfer-rule, which is intended to provide incentives for the replacement of emission intensive installations and thus to achieve environmental benefits. This paper takes a closer look at the transfer-rule's ecological impacts and competitive effects in the field of electricity generation. The analysis suggests that the investment incentives provided by the transfer-rule are limited and uncertain, while at the same time the overall amount of emissions from participants of the trading scheme will not be reduced. Instead the transfer-rule causes windfall profits for incumbent generators and leads to a significant distortion of competition. This cannot be justified by environmental benefits, as has been done by the German government and the European Commission.

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    File URL: http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-316.pdf
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    Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-316.

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    Length: 41 pages
    Date of creation: Jun 2005
    Date of revision:
    Handle: RePEc:han:dpaper:dp-316
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