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The European Union emissions trading scheme and fuel efficiency of fossil fuel power plants in Germany

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  • Germeshausen, Robert

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 power plants in Germany from 2003 to 2012. I find positive efficiency effects in fuel use, leading to a decrease in fuel input of 0.4 percent for an increase in carbon cost of one Euro. A back-of-the-envelope calculation suggests that the reduction in fuel use by fossil fuel power plants due to the introduction of the EU ETS translates into reductions in annual carbon emissions within the German electricity sector by around seven million tonnes in 2012. This represents about 2.4 percent of total annual carbon emissions in the German electricity sector and exemplifies the potential magnitude of efficiency improvements as a measure for reducing carbon emissions.

Suggested Citation

  • Germeshausen, Robert, 2018. "The European Union emissions trading scheme and fuel efficiency of fossil fuel power plants in Germany," ZEW Discussion Papers 18-007, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:18007
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    Keywords

    EU ETS; Carbon Pricing; Fossil Fuel Power Plants; Treatment Intensity;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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