Discussion Papers no. 661
Price and welfare effects of emission quota allocation
We analyze how different ways of allocating emission quotas may influence the electricity market. Using a large-scale numerical model of the Western European energy market, we show that different allocation mechanisms can have very different effects on the electricity market, even if the total emission target is fixed. This is particularly the case if output-based allocation (OBA) of quotas is used, with gas power production substantially higher, partly at the expense of renewable and coal power, than if grandfathering and auctioning based mechanisms are used. The price of emissions is almost twice as high. Moreover, even though electricity prices are lower, the welfare costs of attaining a fixed emission target are significantly higher. The paper analyzes other allocation mechanisms as well, leading to yet more outcomes in the electricity market. The numerical results for OBA are supported by theoretical analysis, with some new general results.
Om publikasjonen
- Tittel
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Price and welfare effects of emission quota allocation
- Ansvarlige
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Rolf Golombek, Sverre A.C. Kittelsen, Knut Einar Rosendahl
- Serie og -nummer
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Discussion Papers no. 661
- Utgiver
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Statistics Norway
- Emne
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Discussion Papers
- ISSN
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1892-753X
- Antall sider
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44
- Målform
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Engelsk
- Om Discussion Papers
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Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.
Kontakt
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