Emissions trading: Impact on electricity prices and energy-intensive industries
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Under the EU-wide Emission Trading Scheme (ETS), CO2 allowances have thus far been allocated largely free of charge. This paper presents a didactic synthesis on the impact of the ETS and argues that such a cost-free allocation will lead to an increase in electricity prices even when strong competition prevails in electricity markets. Electricity prices are also likely to increase as a consequence of the environmentally desirable fuel switch from coal to natural gas in the power sector when certifi cates are entirely auctioned in the power sector as of 2013. This tendency may be attenuated, but not outweighed, by the price decrease of CO2 allowances over the long term.
KeywordsClimate Policy Electricity Production Brown Coal Emission Trading Electricity Market
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