Why do power prices seem to be correlated with the carbon price in some markets and not in others? This crucial question is at the centre of Francesco Gullì’s enlightening book, through which the contributing authors investigate a number of related issues. In particular, they explore why power firms are not consistent in passing-through into power prices the opportunity cost of carbon. They also examine the relationship between the pass-through mechanism and the structure of the power market.

This informative study brings together and interprets original contributions by leading experts from every EU country. Beginning with an overview of the European Union Emissions Trading System (EU ETS) along with an in-depth analysis of the early results and the theoretical issues involved, the book then goes on to explore the main European power markets via a number of empirical case studies. Overall, this volume offers a genuinely comprehensive analysis on the relationship between carbon and power markets and, as such, will prove a valuable contribution to the debate on the EU ETS and to the literature on the interaction between environmental policy and the structure of environmentally regulated markets.

Markets for Carbon and Power Pricing in Europe will be of great interest to researchers and academics within general economics, environmental and energy economics. It will also be warmly welcomed by policymakers, regulators and power sector operators.

Critical Acclaim

‘Whether it concerns environmental economics or law and economics, two areas of science in which I feel well at home, publisher Edward Elgar is a front-runner time and again with relevant and solid publications. This time is no exception, with this book edited by Francesco Gullì.’
– Edwin Woerdman, Tijdschrift voor Energierecht

Contributors

Contributors: D.W. Bunn, L. Chernyavs’ka, C. Fezzi, F. Gullì, S. Hers, J. Honkatukia, P. Linares, V. Mälkönen, A. Perrels, J. Reinaud, F.J. Santos, J. Sijm, B. Wetzelaer

Contents

Contents:

1. Introduction
Francesco Gullì

PART I: OVERVIEW AND THEORETICAL ISSUES
2. The European Emissions Trading Scheme: Overview, Lessons and Perspectives
Liliya Chernyavs’ka

3. Modelling the Short-run Impact of ‘Carbon Trading’ on the Electricity Sector
Francesco Gullì

4. From Electricity Prices to Electricity Costs: Impact of Emissions Trading on Industry’s Electricity Purchasing Strategies
Julia Reinaud

PART II: EMPIRICAL ANALYSES
5. Options to Address Concerns Regarding EU ETS-Induced Increases in Power Prices and Generators’ Profits: The Case of Carbon Cost Pass-through in Germany and the Netherlands
Jos Sijm, Sebastiaan Hers and Bas Wetzelaer

6. A Vector Error Correction Model of the Interactions Among Gas, Electricity and Carbon Prices: An Application to the Cases of Germany and the United Kingdom
Derek W. Bunn and Carlo Fezzi

7. Impacts of the European Emissions Trading Scheme on Finnish Wholesale Electricity Prices
Juha Honkatukia, Ville Mälkönen and Adriaan Perrels

8. The Impact of the European Emissions Trading Scheme on Power Prices in Italy: The ‘Load Duration Curve Approach’
Liliya Chernyavs’ka and Francesco Gullì

9. The Joint Impact of Carbon Emissions Trading and Tradable Green Certificates on the Evolution of Liberalized Electricity Markets: The Spanish Case
Pedro Linares and Francisco J. Santos

Index