This is a past event
Pass-through of CO2 emission costs to hourly electricity prices in Germany
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 carbon 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 carbon costs are passed through to electricity
prices by at least 84 %, with a central range of 98 %–104 % for different load periods. My
results suggest that there is no economic reason for free allowance allocation to the electricity
sector, and thus validate the updated allocation rules in Phase 3 of the European
Union Emissions Trading Scheme.
- Speaker
- Prof. Dr. Beat Hintermann, Universität Basel
- Hosted by
- Dr Nikos Vlassis / Dr Marc Gronwald
- Venue
- S86 EWB