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The Impact of the EU Emissions Trading System on CO2 Intensity in Electricity Generation

Author

Listed:
  • Widerberg, Anna

    () (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Wråke, Markus

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

Prior to the launch of the EU Emissions Trading System (EU ETS) in 2005, the electricity sector was widely proclaimed to have more low-cost emission abatement opportunities than other sectors. If this were true, effects of the EU ETS on carbon dioxide (CO2) emissions would likely be visible in the electricity sector. Our study looks at the effect of the price of emission allowances (EUA) on CO2 emissions from Swedish electricity generation, using an econometric time series analysis for the period 2004–2008. We control for effects of other input prices and hydropower reservoir levels. Our results do not indicate any link between the price of EUA and the CO2 emissions of Swedish electricity production. A number of reasons may explain this result and we conclude that other determinants of fossil fuel use in Swedish electricity generation probably diminished the effects of the EU ETS.

Suggested Citation

  • Widerberg, Anna & Wråke, Markus, 2009. "The Impact of the EU Emissions Trading System on CO2 Intensity in Electricity Generation," Working Papers in Economics 361, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0361
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    File URL: http://hdl.handle.net/2077/20392
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    References listed on IDEAS

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    1. Harrison Fell, 2010. "EU-ETS and Nordic Electricity: A CVAR Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-26.
    2. Jos Sijm & Karsten Neuhoff & Yihsu Chen, 2006. "CO 2 cost pass-through and windfall profits in the power sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 49-72, January.
    3. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    4. Barbara Buchner & Denny Ellerman, 2006. "Over-Allocation or Abatement? A Preliminary Analysis of the Eu Ets Based on the 2005 Emissions Data," Working Papers 2006.139, Fondazione Eni Enrico Mattei.
    5. Alberola, Emilie & Chevallier, Julien & Cheze, Benoi^t, 2008. "Price drivers and structural breaks in European carbon prices 2005-2007," Energy Policy, Elsevier, vol. 36(2), pages 787-797, February.
    6. Derek W. Bunn & Carlo Fezzi, 2007. "Interaction of European Carbon Trading and Energy Prices," Working Papers 2007.63, Fondazione Eni Enrico Mattei.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jaraitė, Jūratė & Di Maria, Corrado, 2012. "Efficiency, productivity and environmental policy: A case study of power generation in the EU," Energy Economics, Elsevier, vol. 34(5), pages 1557-1568.
    2. Karlsson, Hanna & Ahlgren, Serina & Strid, Ingrid & Hansson, Per-Anders, 2015. "Faba beans for biorefinery feedstock or feed? Greenhouse gas and energy balances of different applications," Agricultural Systems, Elsevier, vol. 141(C), pages 138-148.
    3. Carlos Pinho & Mara Madaleno, 2011. "CO 2 emission allowances and other fuel markets interaction," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(3), pages 259-281, September.
    4. Raphael Calel, 2018. "Adopt or Innovate: Understanding Technological Responses to Cap-and-Trade," CESifo Working Paper Series 6847, CESifo Group Munich.
    5. Yu, Haisan, 2010. "The EU ETS and Firm Profits: An Ex-post Analysis for Swedish Energy Firms," Working Paper Series 2011:2, Uppsala University, Department of Economics.
    6. Jurate Jaraite-Ka~ukauske and Corrado Di Maria, 2016. "Did the EU ETS Make a Difference? An Empirical Assessment Using Lithuanian Firm-Level Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).

    More about this item

    Keywords

    Emissions trading; carbon dioxide; climate change; electricity; carbon intensity;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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