@techreport{Bode2004Multi,
abstract = {Emission trading has become recently more and more import in environmental regulation.
In the context of controlling greenhouse gas emissions, the directive on a Europewide
trading scheme for large immobile sources may be perceived as one of the most
important milestones in recent years. Prior to its start, however, a number of very specific
design features have to be agreed upon. In the political discussion, the question of
how to allocate emission rights is considered as one of the most important issues. So far,
a distribution (almost) free of charge is the option of choice. An aspect that has interestingly
attracted little attention in the past is the question of how to allocate emission
rights over time. This may for example be done on the basis of a constant reference metric,
as for example emissions in a certain fixed year, or on the basis of a rolling metric
as for example emissions in the previous year. The following paper analyses four different
allocation options in multi-period emissions trading that are currently discussed in
the European context. The four options are applied for the electricity sector. A power
market close to reality with five different types of power plants (hydro, nuclear, lignite,
coal and gas) is simulated over two periods. The paper distinguishes between a market
effect of emissions trading on the one hand and compliance costs for meeting the emission
reduction obligation on the other. The market effect results from a price increase
which is due to the fact that opportunity costs for using allowances, though received
free of charge, must be considered. However, only compliance costs and not opportunity
costs materialise as costs in the profit and loss account of utilities. It turns out that
the electricity sector as a whole gains from the introduction of the instrument due to the
increase of the electricity price. With regard to the different allocation options, it is
found that utilities have different preferences depending on the fuel used.},
author = {Sven Bode},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {H23; H25; L20; L52; L94; Q25; Q28; 330; abatement costs; allocation of GHG allowances; benchmark; compliance costs; electricity sector; multi-period emission trading; Emissionshandel; Elektrizit\"{a}tswirtschaft; Emissionsrechte; Intertemporale Allokation; Simulation; Umweltschutzkosten; Folgekosten; Theorie; Welt},
language = {eng},
number = {268},
title = {Multi-Period Emissions Trading in the Electricity Sector : Winners and Losers},
type = {HWWA Discussion Paper},
url = {http://hdl.handle.net/10419/19239},
year = {2004}
}
