Friday, December 26, 2008

Recent Study Shows Utilities Exploited Free Allowances in EU-ETS

An ECN study analyzing the impact of the EU Emissions Trading Scheme (ETS) on electricity prices, in particular on wholesale power markets across the EU, found that a significant part of the costs of freely allocated CO2 emission allowances are passed through to power prices, resulting in higher electricity prices for consumers and additional (‘windfall’) profits for power producers. The study discusses some policy implications of the pass-through of these costs, concluding that the pass-through of CO2 costs to electricity prices is a rational, carbon-efficient policy, while the issue of windfall profits can be addressed by either taxing these profits or auctioning - rather than free allocations - of the emission allowances.  What the study didn't consider is the political impact of artificially high electricity prices to meet the modest Kyoto protocol goals in terms of the longer term political will to achieve the far deeper emission cuts necessary to prevent the impacts of global warming from being catastrophic.EU electricity price study

http://lawprofessors.typepad.com/environmental_law/2008/12/recent-study-sh.html

Air Quality, Climate Change, Economics, Energy, EU, Governance/Management | Permalink

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