Industry-Level Emission Trading between Power Producers in the EU
41 Pages Posted: 7 Jun 2003
Date Written: 2000
Abstract
In this paper we investigate how restrictions for emission trading to the energy-intensive power sector will affect the magnitude and distribution of abatement costs across EU countries vis-a-vis a comprehensive EU emission trading regime. We find that emission trading between European power sectors allows the harvest of a major part of the efficiency gains provided by full trade as compared to strictly domestic action. However, trade restrictions may create a more unequal distribution of abatement costs across member states than is the case for a comprehensive trade regime. The reason for this is that restricted permit trade enhances the secondary terms-of-trade benefits to EU member countries with low marginal abatement costs at the expense of the other EU member states.
Keywords: emission trading, computable general equilibrium
JEL Classification: D58, Q43, Q58
Suggested Citation: Suggested Citation