Cross-country comparison of the replacement incentives of the EU ETS in 2008-12: the case of the power sector
In this paper, we conduct a cross-country quantitative analysis of the replacement incentives generated by the EU ETS for the power sector in 2008-12. In order to do so, the allocation rules of the Member States are applied to concrete reference power plants for three different fuel types (lignite, hard coal and gas). Based on these calculations, we compare installation-specific replacement in-centives across the Member States. Our analysis shows that replacement incentives vary significantly across Member States and typically deviate from the incentives provided in the reference case of full auctioning. Furthermore, the EU ETS allocation rules lead to perverse incentives in approximately 30% of the possible replacement options. Only 5 MS do not provide any perverse incentives. Finally, we explore the link between replacement incentives and allocation types. Based on our findings, we derive policy recommendations for the design of emission trading schemes emerging around the world.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: Breslauer Straße 48, D-76139 Karlsruhe|
Web page: http://isi.fraunhofer.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kruger, Joseph & Oates, Wallace E. & Pizer, William A., 2007. "Decentralization in the EU Emissions Trading Scheme and Lessons for Global Policy," Discussion Papers dp-07-02, Resources For the Future.
- Karsten Neuhoff & Kim Keats Martinez & Misato Sato, 2006.
"Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector,"
Taylor & Francis Journals, vol. 6(1), pages 73-91, January.
- Neuhoff, K. & Keats, K. & Sato, M., 2006. "Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector," Cambridge Working Papers in Economics 0642, Faculty of Economics, University of Cambridge.
- Cramton, Peter & Kerr, Suzi, 2002.
"Tradeable carbon permit auctions: How and why to auction not grandfather,"
Elsevier, vol. 30(4), pages 333-345, March.
- Kerr, Suzi & Cramton, Peter, 1998. "Tradable Carbon Permit Auctions: How and Why to Auction Not Grandfather," Discussion Papers dp-98-34, Resources For the Future.
- Peter Cramton & Suzi Kerr, 2002. "Tradeable Carbon Permit Auctions: How and Why to Auction Not Grandfather," Papers of Peter Cramton 02eptc, University of Maryland, Department of Economics - Peter Cramton, revised 06 May 2002.
- Cramton, Peter & Kerr, Suzi, 1998. "Tradeable Carbon Permit Auctions: How and Why to Auction, Not Grandfather," Working Papers 197846, University of Maryland, Department of Agricultural and Resource Economics.
- A. Denny Ellerman, 2008. "New Entrant and Closure Provisions: How do they Distort?," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 63-76.
- Schleich, Joachim & Cremer, Clemens, 2007. "Using benchmarking for the primary allocation of EU allowances - an application to the German power sector," Working Papers "Sustainability and Innovation" S6/2007, Fraunhofer Institute for Systems and Innovation Research (ISI).
- Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June.
- Schleich, Joachim & Rogge, Karoline S. & Betz, Regina, 2008. "Incentives for energy efficiency in the EU Emissions Trading Scheme," Working Papers "Sustainability and Innovation" S2/2008, Fraunhofer Institute for Systems and Innovation Research (ISI).
- Muller, Adrian & Sterner, Thomas, 2009.
"Output and Abatement Effects of Allocation Readjustment in Permit Trade,"
Working Papers in Economics
413, University of Gothenburg, Department of Economics.
- Sterner, Thomas & Muller, Adrian, 2006. "Output and Abatement Effects of Allocation Readjustment in Permit Trade," Discussion Papers dp-06-49, Resources For the Future.
- Karsten Neuhoff & Markus Åhman & Regina Betz & Johanna Cludius & Federico Ferrario & Kristina Holmgren & Gabriella Pal & Michael Grubb & Felix Matthes & Karoline Rogge & Misato Sato & Joachim Schleich, 2006. "Implications of announced phase II national allocation plans for the EU ETS," Climate Policy, Taylor & Francis Journals, vol. 6(4), pages 411-422, July.
- Ahman, Markus & Burtraw, Dallas & Kruger, Joseph & Zetterberg, Lars, 2007. "A Ten-Year Rule to guide the allocation of EU emission allowances," Energy Policy, Elsevier, vol. 35(3), pages 1718-1730, March.
- Gagelmann, Frank, 2006. "Innovation effects of tradable emission allowance schemes: the treatment of new entrants and shutdowns," UFZ Discussion Papers 4/2006, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
When requesting a correction, please mention this item's handle: RePEc:zbw:fisisi:s12010. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.