Cover of publication Climate Change 38/2021 Emissions trading in pursuit of electricity decarbonisation - market structures and regulations matter
Climate | Energy, Economy | Consumption

Emissions trading in pursuit of electricity decarbonisation - market structures and regulations matter

Synthesis report


This report assesses the role of emissions trading systems (ETS) in electricity sector decarbonization through analyses  of carbon market designs and interactions with
electricity market regulations, market structures and additional  policies. It provides a synthesis of five case studies in EU, California, South Korea, China and Mexico. The authors investigate four carbon price quality criteria (volatility, reflection of marginal abatement cost, predictability, and environmental effectiveness) and three abatement channels (clean dispatch, low-carbon investment, and demand-side response). They find that ETSs are especially effective in capitalizing on short-term abatement opportunities when embedded within liberalized electricity markets (e.g. change of merit order or fuel switching). But careful design may enhance effectiveness in hybrid electricity markets where carbon cost pass through might initially be absent. Carbon markets may also send long-term signals on fuel choices and investment decisions; however, the strength of these signals will depend on ETS design and companion policies.

Series
Climate Change | 38/2021
Number of pages
44
Year of publication
Author(s)
William Acworth, Ernst Kuneman, Anatole Boute, Regina Betz
Language
English
Project No. (FKZ)
3718 42 002 0
Publisher
Umweltbundesamt
Additional information
PDF is accessible
File size
1101 KB
Price
0,00 €
Print version
not available
rated as helpful
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Tags:
 Emission Trading  electricity markets  Regulation