How much carbon is in the price of power? The answer to this question
determines many economic consequences of climate policies, i.e. in terms of
costs for downstream industries. It requires, however, to first identify the cost
impact of carbon pricing on the price-setting entity on the power market.
Economic theory tells us that power prices are determined by the cost of the
marginal plant. We propose two simple approaches to conclude on marginal
technologies in electricity wholesale from public data. Both approaches are
complementary, easy to implement, and based upon assumptions which are
commonly used in more complex energy system models. We exemplify their use
with a policy example on the compensation for indirect emission costs from the
EU Emissions Trading Scheme. We find that the current policy design severely
overweighs CO2 emissions from lignite power plants in the Central Western
Europe power market, which may lead to overcompensation of industrial
power users and therefore to a distortion with regard to the policy’s stated goal.
Dieser Eintrag ist Teil der Universitätsbibliographie.
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