ECN publicatie:
The impact of the EU emissions trading scheme on the price of electricity in the Netherlands
Gepubliceerd door: Publicatie datum:
ECN Beleidsstudies 1-2-2004
ECN publicatienummer: Publicatie type:
ECN-RX--04-015 Artikel wetenschap tijdschrift
Aantal pagina's:

Gepubliceerd in: 'Ontwikkeling en Overheid'; Ros, A.P.; H.R.J. Vollebergh(eds.), Sdu Publishers, The Hague, Netherlands, 2003 pages 263-276.

This paper discusses a specific aspect of the proposed EU EmissionsTrading System (EU ETS), i.e. its potential impact on the price of electricity in the Netherlands and, hence, its potential implications for Dutch power producers and consumers. It shows that the EU ETS may lead to a significant increase in the price of electricity in the Netherlands (and other EU Member States), depending on the marginal costs of emissions trading (i.e. the price of an emission allowance), the emission factor of the marginal production technology to generate electricity, and the extent to which the costs of emissions trading will be passed on to the end-users of electricity. If, for one reason or another, these costs will not be passed on to power consumers, it will have an adverse impact on overall efficiency from both an energy and economic point of view. On the other hand, if ? as expected ? these costs are indeed passed on to end-users of electricity, it will benefit power producers (mainly owing to the economic rent of allocating emission allowances for free), while it will harm those energy-intensive industries that, in turn, are not able to pass the higher electricity costs to their customers (resulting in a loss of economic production and income). To some degree, these effects can be best avoided by auctioning emission allowances mandatory throughout the EU ETS and using the auction revenues to reduce the overall level of taxation and social premiums in order to improve the overall competitiveness of domestic industries and to (partly) compensate power consumers for the ET-induced increase in the price of electricity.

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