Market Power in Emission Permit Markets: Theory and Evidence from the EU ETS

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Market Power in Emission Permit Markets: Theory and Evidence from the EU ETS

JournalArticle (Originalarbeit in einer wissenschaftlichen Zeitschrift)

ID	3290434
Author(s)	Hintermann, Beat
Author(s) at UniBasel	Hintermann, Beat
Year	2017
Title	Market Power in Emission Permit Markets: Theory and Evidence from the EU ETS
Journal	Environmental and Resource Economics
Volume	66
Number	1
Pages / Article-Number	89-112
Keywords	Emission permit markets, market power, EU ETS, Cost pass-through
Abstract	A well-known result about market power in emission permit markets is that efficiency can be achieved by full free allocation to the dominant firm. I show that this result breaks down when taking the interaction between input and output markets into account, even if the dominant firm perceives market power in the permit market alone. I then examine the empirical evidence for price manipulation by the ten largest electricity firms during phase I of the EU ETS. I find that some firms’ excess allowance holdings are consistent with strategic price manipulation, and that they cannot be explained by price speculation or by precautionary purchases to insure against uncertain future emissions. My results suggest that market power is likely to be an empirically relevant concern during the early years of emission permit markets.
Publisher	Springer
ISSN/ISBN	0924-6460 ; 1573-1502
edoc-URL	http://edoc.unibas.ch/39675/
Full Text on edoc	Available
Digital Object Identifier DOI	10.1007/s10640-015-9939-4

01/12/2023

Research Database / FORSCHUNGSDATENBANK