Carbon Risk Management

Abstract

state submitted a plan that stipulates the total quantity of allowances and defines the allocation to industries and power plants. Plants are Abstract-This paper presents a price assessment of the emission..... allowances that were introduced in 2005 at International Climate allocated emission allowances based on their historical emissions (to Exchange, Nord Pool, European Energy Exchange, Powernext and the extent data is available) anticipated emissions and technical Energy Exchange Austria. The emission allowances traded at Nord Pool potential as determined by benchmarks. The emission allowance is and International Climate Exchange are forward products with physical for an absolute C02 volume. It is free in Phase I (grandfathering) and delivery (based on the European Union Allowance for prompt delivery as for at least 90% in Phase II. At the end of the obligation period, each the spot price), while the products traded at European Energy Exchange, plant must provide an allowance for each ton of C02 emitted. If a Powernext and Energy Exchange Austria are spot products. We calculate the price levels and correlation between the emission patems l ess C theanits allatedallowancesi ca esellth allowances traded at selected exchanges to determine if the prices exhibit excess allowances on the market (bilateral or exchange). If emissions a similar development. Likewise, we compare the prices of the emission exceed allowances, a plant must buy them on the market or pay fees allowances with the prices of coal and natural gas in the same period of 40E for every excess ton of C02 it emits in Phase I and lOOf in including historic developments. To further evaluate the impact of the Phase II. Additionally, the deficit allowances must be purchased and EU Emissions Trading Scheme (EU ETS) we study the electricity prices provided in the following year. Plants must also subsequently submit in detail in Norway

GenCo's optimal power portfolio selection under emission price risk

“…Overall expected profit and involved risk has been calculated using (9) and (12), considering all trading alternatives. On the basis of total expected profit and involved risk, objective function (13), subject to constraint (14), is optimized. This MINLP optimization problem has been solved by commercially available software GAMS, on its solver SBB-CONOPT3 [37].…”

“…Also, there are complementary studies on carbon price uncertainties, and their influence on electricity market and GenCos [14][15][16]. Researchers have also reflected the correlation of emission market prices with energy market prices, considering the direct link arising due to overlapping goals [17][18][19].…”

GenCo's Integrated Trading Decision Making to Manage Multimarket Uncertainties

“…With continuously increasing stress on emission reduction, upcoming phase of the scheme from 2013 puts an end to free allocation of emission allowances and shifts to full auction mechanism for the power industry [13,14]. This would boost demand for emission permits and consequently increase volatility in their prices [15]. GenCos have to procure required emission permits from carbon market via contracts and spot trading [14].…”

Carbon price risk influence on GenCo's portfolio optimization

“…Since power sector has 50% weightage in ETS, total auction levels would increase by up to 50%, which would significantly boost the demand and prices for such credits [10]. This would result in considerable increase in overall production cost and volatility in prices of such credits [11]. Hence, there is strong motivation for fossil fuel GenCos to consider emission costs and its uncertainty, along with fuel and electricity price uncertainties for making their electricity trading plans.…”