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RENERGI-Fremtidens rene energisystemer

Emission trading in Europe: The importance of allocation rules

Awarded: NOK 6.1 mill.

Project Number:

178392

Application Type:

Project Period:

2007 - 2011

Location:

Subject Fields:

The project will explore the implications of different allocation rules in emission trading schemes (ETS). Current allocation rules in the EU and Norwegian ETS are partly designed so that firms can influence on the number of allowances they get (especiall y for new entrants). The allocation rules will therefore affect firms' incentives, and the outcome of the emission trading market. We will examine how different allocation rules affect cost-efficiency of the ETS. Moreover, we will analyse how permit pric es are affected by different rules. We will also study the links between the emission trading market and the power market. To what degree will the permit price spill over to the power price under different allocation rules? Both theoretical and numerical analyses will be undertaken. A detailed model of the European energy market (LIBEMOD) will be used to simulate the links between the emission trading and power markets in Europe.

Funding scheme:

RENERGI-Fremtidens rene energisystemer