Discrimination against Newcomers: Impacts of the German Emission Trading Regime on the Electricity Sector

Sven Bode, Lothar Hübl, Joey Schaffner and Sven Twelemann

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: The EU Directive 2003/87/EC for the introduction of a European emission trading system has left the task of allocating the emission allowances mainly to the member states. In Germany the details of the allocation method are laid down in the Allocation Act (ZuG 2007). One central element of the Allocation Act is the so called transfer-rule, which is intended to provide incentives for the replacement of emission intensive installations and thus to achieve environmental benefits. This paper takes a closer look at the transfer-rule's ecological impacts and competitive effects in the field of electricity generation. The analysis suggests that the investment incentives provided by the transfer-rule are limited and uncertain, while at the same time the overall amount of emissions from participants of the trading scheme will not be reduced. Instead the transfer-rule causes windfall profits for incumbent generators and leads to a significant distortion of competition. This cannot be justified by environmental benefits, as has been done by the German government and the European Commission.

Keywords: Emission Trading; Competition; Electricity (search for similar items in EconPapers)
JEL-codes: L49 L94 Q28 Q48 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2005-06
New Economics Papers: this item is included in nep-com, nep-eec and nep-mic
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Citations: View citations in EconPapers (3)

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