Carbon Tax or Carbon Permits: The Impact on Generators Risks

Richard Green

The Energy Journal, 2008, vol. Volume 29, issue Number 3, 67-90

Abstract: Volatile fuel prices affect both the cost and price of electricity in a liberalized market. Generators with the price-setting technology will face less risk to their profit margins than those with costs that are not correlated with price, even if those costs are not volatile. Emissions permit prices may respond to relative fuel prices, further increasing volatility. This paper simulates the impact of this on generatorsÕ profits, comparing an emissions trading scheme and a carbon tax against predictions for the UK in 2020. The carbon tax reduces the volatility faced by nuclear generators, but raises that faced by fossil fuel stations. Optimal portfolios would contain a higher proportion of nuclear plant if a carbon tax was adopted.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://www.iaee.org/en/publications/ejarticle.aspx?id=2269 (text/html)
Access to full text is restricted to IAEE members and subscribers.

Related works:
Working Paper: Carbon Tax or Carbon Permits: The Impact on Generators' Risks (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aen:journl:2008v29-03-a04

Ordering information: This journal article can be ordered from
http://www.iaee.org/en/publications/ejsearch.aspx

Access Statistics for this article

More articles in The Energy Journal from International Association for Energy Economics Contact information at EDIRC.
Bibliographic data for series maintained by David Williams ().