The Impact of the EU ETS on Prices, Profits and Emissions in the Power Sector: Simulation Results with the COMPETES EU20 Model

Lise, Wietze; Sijm, J.P.M.; Hobbs, Benjamin F.

doi:10.1007/s10640-010-9362-9

Cited by 113 publications

(49 citation statements)

References 19 publications

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“…Empirical studies [7,9] estimating the pass through rates of CO2 costs to power prices in EU countries [7] found that pass through rates range between 60% and 120% in EU countries under the assumption of perfect competition, while [9] showed that this rate is over 100% for The Netherlands, Belgium, Germany and France. In addition, [20] also found that cost pass through rates are close to 100% when the demand is inelastic, while this rate fell to around 80% with elastic demand.…”

Section: Distinctive Features Of the Korean Etsmentioning

confidence: 99%

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Efficiency versus Equality: Comparing Design Options for Indirect Emissions Accounting in the Korean Emissions Trading Scheme

Yeo

Lee

2015

Sustainability

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Abstract:The Korean emissions trading scheme (ETS) has one special characteristic that makes it different from other schemes, such as the EU ETS. While the other schemes consider only direct emissions from fossil fuels, the Korean ETS also regulates indirect emissions arising from the consumption of electricity. The problem of double counting arises under this setting, in which emissions from the power sector can be accounted for twice, when electricity is produced and consumed. This study aims to compare design options on indirect emissions accounting for the Korean ETS using a computable general equilibrium model. Four scenarios are generated for options accounting for direct and/or indirect emissions and are evaluated in terms of efficiency and equality. The result shows that the ETS operates most efficiently when only direct emissions are considered. However, the option that includes both direct and indirect emissions produces a competent result in terms of equality by spreading the economic burden of emissions reduction among industries. We conclude that this option can be an alternative to meet the key purposes of the Korean ETS.

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Section: Distinctive Features Of the Korean Etsmentioning

confidence: 99%

“…CGE models have been used heavily to compare design options for ETSs, including the EU ETS [7][8][9][10][11] and Korean ETS [12,13]. However, there has been no attempt to simulate indirect emissions accounting, which is inherent in the design of the Korean ETS.…”

Section: Introductionmentioning

confidence: 99%

Efficiency versus Equality: Comparing Design Options for Indirect Emissions Accounting in the Korean Emissions Trading Scheme

Yeo

Lee

2015

Sustainability

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“…While the use of an average price for allowances goes some way towards compensating for this effect, predicting developments in the need for allowances still remains somewhat problematic. (see, e.g., [3,5,7,11,35])…”

Section: Discussionmentioning

confidence: 99%

“…If the waste sector causes fewer GHG emissions than expected, the internal demand for emission allowances may decrease, leading to the possibility of some agents gaining revenues by selling the superfluous emission allowances to other EU ETS sectors and/or players. Such a change in requirements would also affect the market price for emission allowances (see, e.g., [6,7,35,37]. How and to what extent this interdependency between internal emission reduction, supply and demand of emission allowances and their market price would affect the waste sector cannot be predicted and thus were not part of the present paper.…”

Section: Allocation Of Emission Allowances Within the European Union mentioning

confidence: 96%

Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector

Braschel¹,

Posch²,

Pusterhofer³

2013

LCE

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The present study develops an approach explicitly to cover the waste sector under the Emissions Trading Scheme of the European Union (EU ETS). The objective is to analyze various allocation possibilities and the resulting monetary burdens for the waste sector. Three different allocation variants for allocating emission allowances and their financial burden to the waste sector are developed. These variants support implementation within the EU ETS in the third trading period from 2013 to 2020. The respective distributions of emission allowances to the Austrian waste sector are estimated for each variant calculated. Allowances vary depending on specific industry, the relative share of free and purchased allowances, and the relative costs entailed in additional purchase. Although the present paper focuses explicitly on the Austrian waste sector, in principle, the calculation procedure is applicable to waste sectors in other developed countries as well.

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“…We do not take into account the fact that some industrials produce their own electricity or the role of long-term power supply contracts (Reinaud,17 Chernyavs'ka and Gullì (2002) show that the increase in electricity price can be either lower or higher than the marginal CO 2 cost. Lise et al (2010) examine the impact of the EU ETS on the electricity prices in EU and find pass-through rates between 70 and 90% depending on the CO 2 price, the market structure and the demand elasticity assumed. 18 According to the UN COMTRADE database, in 2006, cement and steel exports from Iceland and Norway to the EU 27 represent respectively around 0.4% and 1% of EU imports, while cement and steel exports from EU 27 to Iceland and Norway account around 6% and 3% of EU exports respectively.…”

Section: Targeted Productsmentioning

confidence: 99%

Addressing leakage in the EU ETS: Border adjustment or output-based allocation?

Monjon

Quirion

2011

Ecological Economics

112

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The EU ETS has been criticised for threatening the competitiveness of European industry and generating carbon leakage, i.e. increasing foreign greenhouse gas emissions. Two main options have been put forward to tackle these concerns: border adjustments and output-based allocation, i.e. allocation of free allowances in proportion to current production. We compare various configurations of these two options, as well as a scenario with full auctioning and no border adjustment. Against this background, we develop a model of the main sectors covered by the EU ETS: electricity, steel, cement and aluminium. We conclude that the most efficient way to tackle leakage is auctioning with border adjustment, which generally induces a negative leakage (a spillover). Another relatively efficient policy is to combine auctioning in the electricity sector and output-based allocation in exposed industries, especially if free allowances are given both for direct and indirect emissions, i.e. those generated by the generation of the electricity consumed. Although output-based allocation is generally less effective than border adjustment to tackle leakage, it is more effective to mitigate production losses in the sectors affected by the ETS.Keywords : Emission trading, border adjustment, output-based allocation, competitiveness, carbon leakage. Limiter les fuites dans le système européen d'échange de quotas d'émission de gaz à effet deserre : ajustement aux frontières ou allocation basée sur la production courante ? RésuméLe système européen d'échange de quotas d'émission de gaz à effet de serre (GES) a été critiqué comme menaçant la compétitivité de l'industrie européenne et comme générant des fuites de carbone, c'est-à-dire une augmentation des émissions de GES à l'étranger. Principalement, deux options ont été avancées pour traiter ces problèmes : l'ajustement aux frontières et l'allocation basée sur la production, c'est-à-dire une allocation gratuite de permis proportionnelle à la production courante. Nous développons un modèle représentant les principaux secteurs inclus dans le système européen de quotas (électricité, acier, ciment et aluminium) et analysons plusieurs configurations de chacune de ces options, ainsi qu'un scénario avec enchères et sans ajustement aux frontières. Nous trouvons qu'une allocation par l'intermédiaire d'enchères, complétée par un ajustement aux frontières, permet de limiter le plus les fuites de carbone, voire de diminuer les émissions dans les pays hors UE27 (fuites négatives). Une autre politique relativement efficace est de combiner des enchères pour le secteur de l'électricité et une allocation basée sur la production pour les secteurs exposés aux fuites de carbone, en particulier si la quantité de permis distribuée tient compte des émissions directes et indirectes (liées à la génération de l'électricité consommée). Bien que cette dernière option soit généralement moins efficace qu'un ajustement aux frontières pour limiter les fuites de carbone, elle permet néanmoins de réduire les pertes de...

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The Impact of the EU ETS on Prices, Profits and Emissions in the Power Sector: Simulation Results with the COMPETES EU20 Model

Abstract: Electricity market, Carbon cost pass-through, Power sector modelling, Europe, EU ETS, Windfall profits, CO 2 reduction, Cournot competition, C7, D2, Q4, R3,

Cited by 113 publications

References 19 publications

Efficiency versus Equality: Comparing Design Options for Indirect Emissions Accounting in the Korean Emissions Trading Scheme

Efficiency versus Equality: Comparing Design Options for Indirect Emissions Accounting in the Korean Emissions Trading Scheme

Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector

Addressing leakage in the EU ETS: Border adjustment or output-based allocation?

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