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Pass-through of CO2 Emission Costs to Hourly Electricity Prices in Germany
JournalArticle (Originalarbeit in einer wissenschaftlichen Zeitschrift)
ID 3488397
Author(s) Hintermann, Beat
Author(s) at UniBasel Hintermann, Beat
Year 2016
Title Pass-through of CO2 Emission Costs to Hourly Electricity Prices in Germany
Journal Journal of the Association of Environmental and Resource Economists
Volume 3
Number 4
Pages / Article-Number 857-891
Keywords Emissions trading, EU ETS, pass-through, electricity, CO2, climate change
Abstract I estimate the level of emissions cost pass-through to hourly wholesale electricity prices in Germany, based on spot market data. I control for contemporaneous shocks to demand and supply by constructing a detailed supply curve for fossil generation and intersecting it with residual demand for fossil-based electricity for every hour. Determining the marginal generator allows me to use marginal fuel and allowance costs (rather than prices) as explanatory variables in order to identify the level of cost pass-through directly and with a high level of precision. I find that allowance costs are passed through to electricity prices completely (or nearly completely) on average, but that the degree of pass-through varies over the load curve. My results suggest that there is no economic reason for free allowance allocation to the German electricity sector, and thus I support the updated allocation rules in phase 3 of the European Union Emissions Trading Scheme.
Publisher University of Chicago Press
ISSN/ISBN 2333-5955 ; 2333-5963
Full Text on edoc Available
Digital Object Identifier DOI 10.1086/688486
ISI-Number WOS:000387877700003
Document type (ISI) Article

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