Short Term Electric Production Technology Switching Under Carbon Cap and Trade

This study examines fuel switching in electricity production following the introduction of the European Union’s Emissions Trading System (EU ETS) for greenhouse gas emissions. A short-run restricted cost equation is estimated with carbon permits, high-carbon fuels, and low carbon fuels as variable i...

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Main Authors:	Considine, Timothy, Larson, Donald F.
Format:	Journal Article
Language:	en_US
Published:	MDPI 2015
Subjects:	electricity ETS Emissions Trading System switching carbon cap and trade carbon trading
Online Access:	http://hdl.handle.net/10986/23185

id	okr-10986-23185
recordtype	oai_dc
spelling	okr-10986-231852021-04-23T14:04:13Z Short Term Electric Production Technology Switching Under Carbon Cap and Trade Considine, Timothy Larson, Donald F. electricity ETS Emissions Trading System switching carbon cap and trade carbon trading This study examines fuel switching in electricity production following the introduction of the European Union’s Emissions Trading System (EU ETS) for greenhouse gas emissions. A short-run restricted cost equation is estimated with carbon permits, high-carbon fuels, and low carbon fuels as variable inputs. Shadow values and substitution elasticities for carbon-free energy resources from nuclear, hydroelectric and renewable sources are imputed from the cost equation. The empirical analysis examines 12 European countries using monthly data on fuel use, prices, and electricity generation during the first phase of the European Emissions Trading System. Despite low emission permit prices, this study finds statistically significant substitution between fossil fuels and carbon free sources of energy for electric power production. Significant substitution between fossil fuels and nuclear energy also was found. Still, while 18 of the 20 substitution elasticities are statistically significant, they are all less than unity, consistent with limited substitution. Overall, these results suggest that prices for carbon emission permits relative to prices for carbon and carbon free sources of energy do matter but that electric power producers have limited operational flexibility in the short-run to satisfy greenhouse gas emission limits. 2015-12-01T23:01:15Z 2015-12-01T23:01:15Z 2012-10-23 Journal Article Energies http://hdl.handle.net/10986/23185 en_US CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank MDPI Publications & Research :: Journal Article Publications & Research European Union
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	en_US
topic	electricity ETS Emissions Trading System switching carbon cap and trade carbon trading
spellingShingle	electricity ETS Emissions Trading System switching carbon cap and trade carbon trading Considine, Timothy Larson, Donald F. Short Term Electric Production Technology Switching Under Carbon Cap and Trade
geographic_facet	European Union
description	This study examines fuel switching in electricity production following the introduction of the European Union’s Emissions Trading System (EU ETS) for greenhouse gas emissions. A short-run restricted cost equation is estimated with carbon permits, high-carbon fuels, and low carbon fuels as variable inputs. Shadow values and substitution elasticities for carbon-free energy resources from nuclear, hydroelectric and renewable sources are imputed from the cost equation. The empirical analysis examines 12 European countries using monthly data on fuel use, prices, and electricity generation during the first phase of the European Emissions Trading System. Despite low emission permit prices, this study finds statistically significant substitution between fossil fuels and carbon free sources of energy for electric power production. Significant substitution between fossil fuels and nuclear energy also was found. Still, while 18 of the 20 substitution elasticities are statistically significant, they are all less than unity, consistent with limited substitution. Overall, these results suggest that prices for carbon emission permits relative to prices for carbon and carbon free sources of energy do matter but that electric power producers have limited operational flexibility in the short-run to satisfy greenhouse gas emission limits.
format	Journal Article
author	Considine, Timothy Larson, Donald F.
author_facet	Considine, Timothy Larson, Donald F.
author_sort	Considine, Timothy
title	Short Term Electric Production Technology Switching Under Carbon Cap and Trade
title_short	Short Term Electric Production Technology Switching Under Carbon Cap and Trade
title_full	Short Term Electric Production Technology Switching Under Carbon Cap and Trade
title_fullStr	Short Term Electric Production Technology Switching Under Carbon Cap and Trade
title_full_unstemmed	Short Term Electric Production Technology Switching Under Carbon Cap and Trade
title_sort	short term electric production technology switching under carbon cap and trade
publisher	MDPI
publishDate	2015
url	http://hdl.handle.net/10986/23185
_version_	1764453142411345920

Short Term Electric Production Technology Switching Under Carbon Cap and Trade

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