IDEAS home Printed from https://ideas.repec.org/p/zbw/hwwadp/343.html
   My bibliography  Save this paper

On multi-period emissions trading in the electricity sector

Author

Listed:
  • Bode, Sven

Abstract

Emissions trading schemes on entity level are becoming more and more important in the context of controlling greenhouse gases. The directive on a Europe-wide trading scheme is a prime example. Prior to the start of such a scheme, a number of design features have to be agreed upon. Regarding the allocation of allowances, a distribution that is (almost) free of charge has been the method of choice. An aspect that has interestingly attracted little attention thus far is the question of how to allocate emission rights over time, i.e. in single, subsequent periods that exist in real trading schemes. In this paper, different allocation options are applied to the electricity sector. A power market that mirrors reality with five different types of power plants (hydro, nuclear, lignite, coal and gas) is simulated over two periods. On the demand side, three different load curves are assumed (winter, summer, transition). For each demand curve different elasticities are analysed. Supply and demand are matched on an hourly basis. The allocation is either based on absolute emissions or on a generation benchmark. The base period / generation metric is either constant or updated over time. Thus, four different allocation options exist. It turns out that the electricity sector as a whole gains from the introduction of the instrument. Its aggregated gross margin is considerably higher with an allocation based on a constant period / generation metric. It is thus the preferred allocation option. This result contradicts other recent studies that assumed completely inelastic demand. Single plant operators may, however, win or lose in terms of the net financial impact. On the installation level, preferences regarding the different allocation scheme are a function of the fuel used.

Suggested Citation

  • Bode, Sven, 2006. "On multi-period emissions trading in the electricity sector," HWWA Discussion Papers 343, Hamburg Institute of International Economics (HWWA).
  • Handle: RePEc:zbw:hwwadp:343
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/19371/1/343.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Kun & Fu, Xiaowen & Luo, Meifeng, 2015. "Modeling the impacts of alternative emission trading schemes on international shipping," Transportation Research Part A: Policy and Practice, Elsevier, vol. 77(C), pages 35-49.
    2. Lund, Peter, 2007. "Impacts of EU carbon emission trade directive on energy-intensive industries -- Indicative micro-economic analyses," Ecological Economics, Elsevier, vol. 63(4), pages 799-806, September.
    3. Veith, Stefan & Werner, Jörg R. & Zimmermann, Jochen, 2009. "Capital market response to emission rights returns: Evidence from the European power sector," Energy Economics, Elsevier, vol. 31(4), pages 605-613, July.
    4. Chicco, Gianfranco & Mancarella, Pierluigi, 2009. "Distributed multi-generation: A comprehensive view," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(3), pages 535-551, April.
    5. Longfei He & Chenglin Hu & Daozhi Zhao & Haili Lu & Xiaoxi Fu & Yiyu Li, 2016. "Carbon emission mitigation through regulatory policies and operations adaptation in supply chains: theoretic developments and extensions," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 84(1), pages 179-207, November.
    6. Mo, Jian-Lei & Zhu, Lei & Fan, Ying, 2012. "The impact of the EU ETS on the corporate value of European electricity corporations," Energy, Elsevier, vol. 45(1), pages 3-11.
    7. Falbo, Paolo & Felletti, Daniele & Stefani, Silvana, 2013. "Free EUAs and fuel switching," Energy Economics, Elsevier, vol. 35(C), pages 14-21.
    8. Golombek, Rolf & Kittelsen, Sverre A.C. & Rosendahl, Knut Einar, 2013. "Price and welfare effects of emission quota allocation," Energy Economics, Elsevier, vol. 36(C), pages 568-580.
    9. Yu Zhou & Jin Fan & Dingtao Zhao & Shanyong Wang, 2016. "The impact of carbon trading on regulated agents in China," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 21(3), pages 377-390, March.
    10. Jaehn, Florian & Letmathe, Peter, 2010. "The emissions trading paradox," European Journal of Operational Research, Elsevier, vol. 202(1), pages 248-254, April.
    11. da Silva, Patricia Pereira & Moreno, Blanca & Figueiredo, Nuno Carvalho, 2016. "Firm-specific impacts of CO2 prices on the stock market value of the Spanish power industry," Energy Policy, Elsevier, vol. 94(C), pages 492-501.

    More about this item

    Keywords

    allocation of GHG allowances; electricity sector; multi-period emissions trading;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:hwwadp:343. 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). General contact details of provider: http://edirc.repec.org/data/hwwaade.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.