Has the EU-ETS Financed the Energy Transition of the Italian Power System?

This paper focuses on the relationship between the European Union Emission Trading System allowances’ prices and the Italian electricity price, aiming at assessing whether such a mechanism has been a driver for the decarbonization of the power sector. To this aim, we calculate the long-run relationships between energy prices, natural gas prices and allowances’ prices, through a VECM model, distinguishing between peak and off-peak prices. The analysis is carried out for the third phase of the EU-ETS, which started in 2013, and for two-year rolling windows that account for changes over time of the pass-through rates. It is shown that the natural gas price has a high pass-through rate of roughly 70%, which is increasing over time. On the contrary, the pass-through rate of the allowances’ price is as low as 7% for the wholesale electricity price, being slightly more and less for the peak and off-peak prices, respectively. However, this rate has been substantially changing over time, starting from a high level and falling significantly, becoming negative in the recent years. This could signal that the EU-ETS has been increasingly more effective in endogenizing emission costs for power producers, inducing them to reduce their production costs associated with emissions by means of a change in technologies. However, the analysis of the impulse response functions hardly supports this finding, eventually casting doubts on the effectiveness of the EU-ETS in Italy to drive the transition toward a less carbon-intensive power supply.

Download Full-text

Gas prices expose Europe’s energy vulnerability

Emerald Expert Briefings ◽

10.1108/oxan-db264356 ◽

2021 ◽

Keyword(s):

Natural Gas ◽

Central Banks ◽

Liquefied Natural Gas ◽

Electricity Price ◽

Energy Prices ◽

Content Type ◽

Indigenous Production ◽

Europe Today ◽

The Cost

Significance The cost of gas-fired generation sets the electricity price in much of Europe today. Falling indigenous production has left Europe reliant on gas imports and exposed it to global liquefied natural gas (LNG) prices set by fast-recovering China. This has left retail-only electricity suppliers vulnerable and increases the risk that falling disposable incomes will undermine post-pandemic recovery. Impacts EU carbon allowance prices will stay strong. Higher energy prices will stoke inflation amid a fragile recovery, posing a dilemma for central banks. Rising gas prices have had ancillary but potentially alarming impacts as some fertiliser and CO2 producers have shut in production.

Download Full-text

The Green Deal and the Resilience of EU-Russian Energy Relations

International Organisations Research Journal ◽

10.17323/1996-7845-2021-03-05 ◽

2021 ◽

Vol 16 (3) ◽

pp. 108-123

Author(s):

Tatiana Romanova ◽

Keyword(s):

Natural Gas ◽

The Other ◽

Relative Importance ◽

Internal Constraints ◽

The Third ◽

Governance Practices ◽

New Challenges ◽

Energy Relations ◽

Over Time ◽

The Eu

In this article, the influence of the European Union’s (EU) Green Deal on its energy relations with Russia is analyzed. Two models of resilience are identified in the EU’s discourse. One aims at achieving resilience at the level of the EU’s energy sector (the “microsystem” for the purpose of this study) while destroying the system of EU-Russia relations (the “macrosystem”). The other aims at achieving resilience in the micro- and macrosystem at the same time. Empirically, the study relies on EU documents and speeches by its national and supranational representatives. Three cases are studied. The first covers competition of two models of resilience in the principles that the EU defined for its relations with Russia. The second case involves investments that slow down the development of renewable sources of energy in favour of natural gas. This case demonstrates how resilience can be achieved as a return to the previous pattern (bouncing back). Although it can be achieved both at the EU-only level and at the level of the EU and its relations with Russia, it clearly favours the latter. The third case involves the import of hydrogen, which creates possibilities for resilience both at the microsystem alone and at the micro- and macrosystems at the same time. This latter option is achieved through adaptation to new challenges (bouncing forward). The author concludes by comparing the two models of resilience. The model that prioritizes the microsystem’s resilience and challenges the macrosystem is based on the synthesis of environmental and geopolitical logics. The other model is based on economic and market logics, but the EU’s normative leadership is a prerequisite. The EU’s discourse demonstrates the viability of both models and related governance practices. Most likely, the two models will co-exist, but their relative importance will vary over time. This variation will be primarily determined by the EU’s internal constraints. However, Russia’s policy can facilitate the model of resilience, achieved in both the micro- and macrosystem.

Download Full-text

The role of EU-ETS Mechanism as Environmental Investment Promoter in Europe and Developing Countries

Revista Latinoamericana de Desarrollo Económico ◽

10.35319/lajed.20142282 ◽

2014 ◽

pp. 85-134

Author(s):

Carlos Díaz Valdivia

Keyword(s):

Developing Countries ◽

Phase I ◽

Interest Rates ◽

Kyoto Protocol ◽

Energy Prices ◽

Eu Ets ◽

Environmental Investment ◽

The Impact ◽

The Eu

This research attempts to provide a better understanding about the role of the European Union Emission Trading System (EU-ETS) as private environmental investment promoter. It explores the macroeconomic behavior of private environmental investments before and after the implementation of EU-ETS in 2005 until the end of Phase I of the mechanism. Also, private environmental investments are contrasted with variables like: economic growth, interest rates, and energy prices (gas and electricity) in order to quantify the impact of these on private environmental decisions and evaluate the level of impact (slow, moderate and strong) of all these variables together with the EU-ETS implementation on private environmentalinvestment decisions. For this purpose it is used a statistical approach through multiple linear regressions for the cases of Germany, Spain, France and The Netherlands and a single panel estimation with data information of all the countries mentioned. The results show that the signature of Kyoto Protocol in year 1997 -as a preamble of EU-ETS- provided a perverse incentive on private environmental investments until 2004. During Phase I (2005–2007) of the EU-ETS mechanism, private environmental investments showed an important positive recovery that was not enough to reach pre Kyoto Protocol levels. Finally, it is analyzed the investment in developing countries through CDM projects.

Download Full-text

Cost Pass-Through in Strategic Oligopoly: Sectoral Evidence for the EU ETS

SSRN Electronic Journal ◽

10.2139/ssrn.1674850 ◽

2010 ◽

Cited By ~ 2

Author(s):

Viktoria Alexeeva-Talebi

Keyword(s):

Eu Ets ◽

Pass Through ◽

The Eu

Download Full-text

Impact of Energy Price Variability on Global Fertilizer Price: Application of Alternative Volatility Models

Sustainable Agriculture Research ◽

10.5539/sar.v4n4 ◽

2015 ◽

Vol 4 (4) ◽

pp. 132 ◽

Cited By ~ 1

Author(s):

Prabuddha Sanyal ◽

Leonard A. Malczynski ◽

Paul Kaplan

Keyword(s):

Natural Gas ◽

Structural Break ◽

Production Costs ◽

Energy Prices ◽

Volatility Models ◽

Natural Gas Prices ◽

Negative Effect ◽

Oil And Natural Gas ◽

Structural Break Tests ◽

On Farm

This study evaluates the effects of volatility in crude oil and natural gas prices on fertilizer price variations. Specifically, the study looks at the mean and volatility effects of oil and natural gas prices on both mean and volatility changes in fertilizer prices. Both symmetric models [GARCH (1, 1)] and asymmetric models [GJR (1, 1)] were used to model volatility in fertilizer prices and to evaluate the effects of the volatility over different time periods using Bai-Perron structural break tests. The results show that changes in oil and natural gas prices increased fertilizer prices after the crisis period, during June 2007 to June 2008. Both the ARCH and GARCH had significant effects on fertilizer prices, suggesting that the volatility effects of oil and natural gas prices on fertilizer prices were also significant. Furthermore, the maximum impact of higher energy prices depends on triple superphosphate and diammonium phosphate (DAP) leading to higher production costs and consequent increase in total farm expenditures for crop producers. These higher production costs invariably have a negative effect on farm profitability, thus reducing the investment levels in the farm sector.

Download Full-text

VOLATILITY SPILLOVER AND DYNAMIC CORRELATION BETWEEN THE CARBON MARKET AND ENERGY MARKETS

Journal of Business Economics and Management ◽

10.3846/jbem.2019.10762 ◽

2019 ◽

Vol 20 (5) ◽

pp. 979-999 ◽

Cited By ~ 3

Author(s):

Yufeng Chen ◽

Fang Qu ◽

Wenqi Li ◽

Minghui Chen

Keyword(s):

Natural Gas ◽

Global Financial Crisis ◽

Energy Markets ◽

Volatility Spillover ◽

Energy Prices ◽

Eu Ets ◽

Dynamic Correlation ◽

Demand Reduction ◽

The Global Financial Crisis ◽

Multi Phase

This paper studies the volatility spillover and dynamic correlation between EU emission allowance (EUA) prices and energy prices by considering three energy commodities, including oil, gas, and coal. The asymmetric BEKK model is employed for multi-phase analysis of EU ETS, yet only a little empirical evidence backing up the existence of volatility spillover between EU ETS and energy markets, i.e., the establishments of the EU ETS may not effectively limitation and influence energy markets. The time-varying conditional correlation between EUA and each of energy prices is analyzed. The dynamic correlation shows there is a relatively stable, positive correlation between the EUA and Brent oil, natural gas. However, modeling the dynamics correlation also suggests that the correlation between the EUA and the natural gas, coal became weaker and more volatile since second and third phases, especially after the Global Financial Crisis in 2008, which may indicate that the demand reduction in emission allowances caused by the economic slowdown far exceeds the reduction in the annual restraint of EU ETS.

Download Full-text

Does Carbon Risk Matter? Evidence of Carbon Premium in EU Energy-Intensive Companies

Energies ◽

10.3390/en14071855 ◽

2021 ◽

Vol 14 (7) ◽

pp. 1855

Author(s):

Pawel Witkowski ◽

Adam Adamczyk ◽

Slawomir Franek

Keyword(s):

Emissions Trading ◽

Energy Sector ◽

Significant Problem ◽

Eu Ets ◽

Stable Carbon ◽

Emissions Trading Scheme ◽

Trading Scheme ◽

The Impact ◽

Over Time ◽

The Eu

In this paper we have assessed the impact of the European Union’s Emissions Trading Scheme (EU ETS) on the level of the carbon premium. The aim of the study is to determine whether there is a stable carbon premium in energy-intensive sectors. Unlike other studies, our research sample included not only companies in the energy sector, but also entities classified as energy-intensive. In the research, we used our own criterion for allocating companies to a clean and dirty portfolio, which made it possible to make the estimation of the carbon premium more resistant to changes in the rules for allocation of emission allowances. We detected a positive, statistically significant carbon premium in the years 2003–2012 and a negative one in the years 2013–2015, but we did not detect a statistically significant carbon premium in the period 2016–2019. This means that there are no grounds for concluding that there is a stable, positive carbon premium for energy-intensive companies subject to the EU ETS over time. We have also noticed that a significant problem in studying the impact of the EU ETS on the carbon premium is the use of static portfolios of clean and dirty companies.

Download Full-text