 Impact of carbon cost on wholesale electricity price: A note on price pass-through issuesWook Kim, Deb Chattopadhyay and Jong-bae Park Energy, 2010, vol. 35, issue 8, 3441-3448 Abstract: Carbon costs – either in the form of a carbon tax or through permit prices in an emissions trading scheme – would ultimately be reflected in higher electricity prices. Carbon cost “pass-through” is critical to the survival of existing coal generation assets and has been discussed widely as a measure of business impact in the electricity industry. This paper sets out in a structured way the factors that determine price pass-through and why this may differ greatly across different systems. Although the basic concept of price pass-through is simple, a clear understanding of the underlying factors is critical to developing insights on how carbon cost would impact on existing coal generation businesses. It is shown that pass-through can vary drastically if the underlying dispatch potential of generators varies significantly across alternative emissions reduction scenarios. It can also vary depending on the availability of competing cleaner forms of generation. Pass-through as a measure of business performance is, therefore, hard to generalize across different circumstances and should be interpreted carefully. Keywords: Carbon cost pass-through; Emissions trading; Carbon tax (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:35:y:2010:i:8:p:3441-3448 DOI: 10.1016/j.energy.2010.04.037 Access Statistics for this article Energy is currently edited by Henrik Lund and Mark J. Kaiser More articles in Energy from Elsevier |
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