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This paper provides a model assessment of the role of developing Asia in the context of climate change policies. We diagnose the potential response of Asian economies to the imposition of various climate policies, showing that if we were to equally price carbon across the world roughly half of the abatement would occur in developing Asia. We show that such autarkic measures would be consistent with the policy targets put forward by the Major Economies Forum but would not necessarily be equitable. We thus propose a fragmented cap-and-trade scheme with a specific regional market for developing Asia, the Asian Emission Trading Scheme (Asia ETS). We assess the role of the Asia ETS on the macro-economy and international transfers vis-a- vis the standard case of global trading. Our results indicate that creating two large trading markets would result in small global efficiency losses, while at the same time generating more reasonable regional incentives and transfers.

Even if aviation industry has considerably reduced its fuel consumption in relation to goods and passengers carried, however, the remarkable, and almost constant, increment of flights has caused a substantial increase of chemical pollutants. In particular, greenhouse gas (GHG) emissions, from aviation, currently account for approximately 3.5% of the total emissions from developed countries. The most significant impacts are due to emissions of carbon dioxide, nitrogen oxides and other substances that, even in small amounts (water vapour, CH4, N2O, particulates, etc.), due to their high Radiative Forcing (RF), are able to vary, from about 2 to 4 times greater than those of CO2 alone (according to an IPCC report), the physical parameters (temperature, albedo, humidity, etc.) and chemical composition of the atmosphere, changing at the same time, many natural phenomena like the intensity, the rate and the same type of precipitations. Several guidelines and norms for the adoption and implementation of a global scheme of regulations are currently being suggested by numerous subjects, although the prospects of a comprehensive inter-governmental agreement on the adoption of these schemes are uncertain. European Commission has resolved incorporating aviation in the Emissions Trading Scheme (EU ETS). This new Directive has become effective from the 1st January 2012, but certain airlines have already threatened to boycott it, while others have suggested that they will transfer the costs to their passengers. The increase in costs for airlines could lead to a competitive disadvantage for European airlines and to a substantial environmental inefficiency of this normative measure.

In this paper we investigate the economic impacts of the European Emission Trading Scheme (EU-ETS) on the Italian electricity market by a power generation expansion model. In particular, we assume that generators make their capacity expansion decisions in a Cournot or in a perfect competition manner. This model is used to measure the effects of the EU-ETS Directives on electricity prices and demand, investments and generators' profits both in an oligopolistic and in a perfectly competitive organization of the power market. We adopt a technological representation of the energy market which is discretized into six geographical zones (North, Center-North, Center-South, South, Sicily, Sardinia) and five virtual poles (Monfalcone, Foggia, Brindisi, Rossano, Priolo) with limited production for a total of eleven zones. We assume that generators operate in different zones connected by interconnections with limited capacity and produce energy by running existing or new plants in which they directly invest. We consider several investment scenarios under the CO2 regulation with and without incentives to renewables. The scenarios also include simulations on future effects of the third EU-ETS phase on the system. Our analysis shows that perfect competition induces generators to invest more than in an oligopolistic framework, but in both market configurations, investments are mainly concentrated in fossil-red plants (CCGT and coal), leaving a small proportion to new wind plants. This happens also in presence of incentives given to renewable technologies. We can thus conclude that investments in a secure and efficient technology like CCGT are preferable compared to those in renewables that cannot be used with continuity. This investment policy affects electricity prices that significantly increase in 2020 compared to their 2009 levels. The raise of electricity prices in 2020 is particularly favorable for generators operating as Cournot players which are able to increase their profits compared to 2009, despite the full auctioning system foreseen for the allocation of CO2 allowance to the power sector in the third EU-ETS phase. The solution of the overall system is found by exploiting the mixed complementarity theoretical framework and solution algorithms. The developed model is implemented as complementarity problems and solved in GAMS using the PATH solver.

In this paper we study the short term price behavior of December 2008 future prices for EU emission allowances. We model returns and volatility dynamics of this price showing that a standard ARMA-GARCH framework is not adequate and that the gaussianity assumption is rejected due to the occurrence of a number of level and volatility outliers. To improve the fitness of the model, we combine the underlying price process with an additive stochastic jump process. The resulting distribution, a mixture of Gaussians, allows for endogenously determined jumps in the process governing the returns, while the mixing law determines the jump probability. The performance of the model is improved by introducing a time varying jump probability explained by two variables. The first one is the daily relative change in the volume of transactions and suggests that sharp increases in volume increase volatility even in the absence of changes in what recent literature considers as market fundamentals. The second one accounts for changes in the jump probability associated to the European Commission's announcements regarding the NAPs for Phase II. We find that announcements concerning the NAPs induce jumps in the process and tend to increase volatility. This result suggests authorities should advocate to increase stability in the regulatory environment which is crucial to allow traders to realize efficient trading strategies and informed investment decisions regarding pollution reduction.

ED EPS; Simultaneity between commitment periods (2008-2012) of the International Emissions Trading scheme and the European Emissions Trading Scheme is likely to generate distortions in terms of burden distribution among sectors. There will be two levels of trading (a country and an entity level), which both need to be consistent with one another. Besides, features of these two schemes are different. Thus, to reach international targets, each European government will have to adopt an additional policy. It may consist in implementing a tax on emissions of sectors non-covered by EU-ETS. The level of this tax depends on the effort realized within the European market. We propose a modeling of this two-level environmental policy, focusing on the additional tax rates and introducing several cases of linkages. We obtain empirical estimations of the efforts that could be demanded to non-covered sectors, and of the price(s) of carbon. We show that the opportunities of trading provided by the international market alleviate the burden supported by non-covered sectors.

The progressive relocation of part of the Energy Intensive Industries (EIIs) out of Europe is one of the possible consequences of the combination of emission charges and higher electricity prices entailed by the EU-Emission Trading Scheme (EU-ETS). In order to mitigate this effect, EIIs have asked for special power contracts whereby they would be supplied from dedicated power capacities at average (capacity, fuel, transmission and emission allowance) costs. We model this situation on a prototype power system calibrated on four countries of Central Western Europe. In order to capture the main feature of EIIs' demand, we separate the consumer market in two segments: EIIs and the rest. EIIs buy electricity at average cost price while the rest pays marginal cost. We consider two different types of EIIs' contractual arrangements: a single region wide and zonal average cost prices. We also analyze the cases where generators only rely on existing capacities or can invest in new ones. We find that these average cost contracts can indeed partially mitigate the incentive to relocate activities but with quite diverse regional impacts depending on different national power policies. Models are formulated as a non-monotone complementarity problems with endogenous energy, transmission and allowance prices and are implemented in GAMS.

The inception of the Emission Trading System in Europe (EU-ETS) has made power price more expensive. This affects the competitiveness of electricity intensive industrial consumers and may force them to leave Europe. Taking up of a proposal of the industrial sector, we explore the possible application of special contracts, based on the average cost pricing system, which would mitigate the impact of CO2 cost on their electricity price. The model supposes fixed generation capacities. A companion paper treats the case with capacity expansion. We first consider a reference model representing a perfectly competitive market where all consumers (households and industries) are price-takers and buy electricity at the short-run marginal cost. We then change the market design assuming that large industrial consumers pay power either at a single or at a nodal average cost price. The analysis of these problems is conducted with simulation models applied to the Northwestern European market. The equilibrium models developed are implemented in the GAMS environment.

Zur Zeit entwickelt sich auf Grundlage des Kyoto-Protokolls ein internationaler Markt für Klimaschutzzertifikate, die von den sogenannten Annex-B-Ländern für die Erfüllung ihrer Klimaschutzziele benötigt werden. Russland ist der größte potentielle Anbieter von Kyoto-Klimaschutzzertifikaten und gleichzeitig der dominante Anbieter auf dem europäischen Erdgasmarkt. Da die Erdgasverbrennung zu Emissionen des Treibhausgases CO2 führt, existieren Wechselwirkungen zwischen den beiden Märkten, die von Russland im Rahmen eines simultanen Optimierungskalküls genutzt werden können und zu interdependenten Strategien auf dem Erdgas- und Klimaschutzzertifikatemarkt führen. Die Untersuchung dieser Strategien bildet den Schwerpunkt der Arbeit. Es wird eine modellgestützte Analyse durchgeführt, die sich auf die Erdgasnachfrage des europäischen Elektrizitätssektors als Ausgangspunkt für die Entwicklung der interdependenten Strategien Russlands konzentriert.

This paper addresses a problem arising from the introduction of the Emission Trading System in Europe (EU-ETS). Electricity intensive industrial consumers are currently facing a high price of electricity, which affects their competitiveness and may force them to leave Europe. We explore the possibility of developing special contracts, which would limit the impact of CO2 prices on electricity intensive industrial consumers. The models presented reveal several innovative aspects to the extent that it involves two pricing mechanisms. One of them introduces a perfect competition market where all consumers are price-takers and purchase electricity at a price based on the short run marginal costs. The other mechanism applies average cost prices to large industrial consumers. The analysis of these problems is dealt with simulation models applied to the Northwestern Europe market. The mathematical optimization models developed are implemented using the GAMS modeling system.

Má bakalářská práce je zaměřena na systém obchodování s emisemi skleníkových plynů. Tvorbu Národního alokačního plánu pro Českou republiku, systém obchodování na evropských trzích a praktické zkušenosti s chováním podniků vzhledem k tomuto novému nástroji ochrany životního prostředí. Jako hlavní problém je zde zmiňován samotný účel a výsledky, které byly s tímto tématem očekávány.

The recent low CO2 prices in the European Union Emission Trading Scheme (EU ETS) have triggered a discussion whether the EU ETS needs to be adjusted. We study the effects of CO2 price floors and a price ceiling on the dynamic investment pathway of two interlinked electricity markets (loosely based on Great Britain, which already has introduced a price floor, and on Central Western Europe). Using an agent-based electricity market simulation with endogenous investment and a CO2 market (including banking), we analyse the cross-border effects of national policies as well as system-wide policy options.A common, moderate CO2 auction reserve price results in a more continuous decarbonisation pathway. This reduces CO2 price volatility and the occurrence of carbon shortage price periods, as well as the average cost to consumers. A price ceiling can shield consumers from extreme price shocks. These price restrictions do not cause a large risk of an overall emissions overshoot in the long run. A national price floor lowers the cost to consumers in the other zone; the larger the zone with the price floor, the stronger the effect. Price floors that are too high lead to inefficiencies in investment choices and to higher consumer costs.