Publication:
Substitution and Technological Change under Carbon Cap and Trade : Lessons from Europe

Simple item page
dc.contributor.authorConsidine, Timothy J.
dc.contributor.authorLarson, Donald F.
dc.date.accessioned2012-03-19T19:10:49Z
dc.date.available2012-03-19T19:10:49Z
dc.date.issued2009-06-01
dc.description.abstractThe use of carbon-intense fuels by the power sector contributes significantly to the greenhouse gas emissions of most countries. For this reason, the sector is often key to initial efforts to regulate emissions. But how long does it take before new regulatory incentives result in a switch to less carbon intense fuels? This study examines fuel switching in electricity production following the introduction of the European Union s Emissions Trading System, a cap-and-trade regulatory framework for greenhouse gas emissions. The empirical analysis examines the demand for carbon permits, carbon based fuels, and carbon-free energy for 12 European countries using monthly data on fuel use, prices, and electricity generation. A short-run restricted cost function is estimated in which carbon permits, high-carbon fuels, and low-carbon fuels are variable inputs, conditional on quasi-fixed carbon-free energy production from nuclear, hydro, and renewable energy capacity. The results indicate that prices for permits and fuels affect the composition of inputs in a statistically significant way. Even so, the analysis suggests that the industry s fuel-switching capabilities are limited in the short run as is the scope for introducing new technologies. This is because of the dominant role that past irreversible investments play in determining power-generating capacity. Moreover, the results suggest that, because the capacity for fuel substitution is limited, the impact of carbon emission limits on electricity prices can be significant if fuel prices increase together with carbon permit prices. The estimates suggest that for every 10 percent rise in carbon and fuel prices, the marginal cost of electric power generation increases by 8 percent in the short run. The European experience points to the importance of starting early down a low-carbon path and of policies that introduce flexibility in how emission reductions are achieved.en
dc.identifierhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090608131814
dc.identifier.doi10.1596/1813-9450-4957
dc.identifier.urihttps://hdl.handle.net/10986/4150
dc.languageEnglish
dc.relation.ispartofseriesPolicy Research working paper ; no. WPS 4957
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectALLOCATION OF PERMITS
dc.subjectAPPROACH
dc.subjectATMOSPHERE
dc.subjectAVAILABILITY
dc.subjectAVERAGE PRICES
dc.subjectBIOMASS
dc.subjectCARBON
dc.subjectCARBON ABATEMENT
dc.subjectCARBON CAPTURE
dc.subjectCARBON CONTENT
dc.subjectCARBON DIOXIDE
dc.subjectCARBON DIOXIDE EMISSION
dc.subjectCARBON DIOXIDE EMISSIONS
dc.subjectCARBON EMISSION
dc.subjectCARBON EMISSION FACTOR
dc.subjectCARBON EMISSION REDUCTIONS
dc.subjectCARBON EMISSIONS
dc.subjectCARBON ENERGY
dc.subjectCARBON FUELS
dc.subjectCARBON INTENSITY
dc.subjectCARBON MARKETS
dc.subjectCARBON OFFSET
dc.subjectCARBON OFFSETS
dc.subjectCARBON PATH
dc.subjectCARBON PRICE
dc.subjectCARBON PRICES
dc.subjectCARBON PRICING
dc.subjectCEMENT
dc.subjectCERTIFIED EMISSION REDUCTIONS
dc.subjectCLIMATE CHANGE
dc.subjectCLIMATE CHANGE POLICIES
dc.subjectCLIMATE POLICY
dc.subjectCOAL
dc.subjectCOMBUSTION
dc.subjectCONSUMPTION OF PETROLEUM
dc.subjectCYCLE GAS
dc.subjectDEMAND ELASTICITY
dc.subjectDEMAND FOR ELECTRICITY
dc.subjectDEMAND FUNCTIONS
dc.subjectELASTICITY OF SUBSTITUTION
dc.subjectELECTRIC POWER
dc.subjectELECTRIC POWER GENERATION
dc.subjectELECTRIC POWER PRODUCTION
dc.subjectELECTRIC POWER SECTOR
dc.subjectELECTRIC UTILITIES
dc.subjectELECTRICITY
dc.subjectELECTRICITY GENERATION
dc.subjectELECTRICITY PRICES
dc.subjectELECTRICITY PRODUCERS
dc.subjectELECTRICITY PRODUCTION
dc.subjectEMISSION
dc.subjectEMISSION ABATEMENT
dc.subjectEMISSION CONTROLS
dc.subjectEMISSION FACTOR
dc.subjectEMISSION LIMITS
dc.subjectEMISSION PERMITS
dc.subjectEMISSION REDUCTIONS
dc.subjectEMISSION TRADING
dc.subjectEMISSIONS INCREASES
dc.subjectEMPLOYMENT
dc.subjectENERGY MARKET
dc.subjectENERGY MARKETS
dc.subjectENERGY PRICES
dc.subjectENERGY PRODUCTION
dc.subjectENERGY RESOURCES
dc.subjectENERGY SERVICE
dc.subjectENERGY SOURCES
dc.subjectFACTOR PRICES
dc.subjectFERROUS METALS
dc.subjectFOSSIL
dc.subjectFOSSIL ENERGY
dc.subjectFOSSIL FUEL
dc.subjectFOSSIL FUEL CONSUMPTION
dc.subjectFOSSIL FUEL USE
dc.subjectFOSSIL FUELS
dc.subjectFREE ENERGY
dc.subjectFUEL
dc.subjectFUEL OIL
dc.subjectFUEL PRICE
dc.subjectFUEL PRICES
dc.subjectFUEL SUBSTITUTION
dc.subjectFUEL SWITCHING
dc.subjectFUEL USE
dc.subjectFUELS
dc.subjectGAS TURBINE
dc.subjectGAS TURBINE TECHNOLOGY
dc.subjectGENERATING CAPACITY
dc.subjectGENERATION CAPACITY
dc.subjectGEOTHERMAL CAPACITY
dc.subjectGEOTHERMAL ENERGY
dc.subjectGREENHOUSE
dc.subjectGREENHOUSE GAS
dc.subjectGREENHOUSE GAS EMISSIONS
dc.subjectHEAT
dc.subjectHEAT RATE
dc.subjectHYDROELECTRIC ENERGY
dc.subjectHYDROELECTRIC POWER
dc.subjectINPUT PRICES
dc.subjectINTERNATIONAL ENERGY AGENCY
dc.subjectIRREVERSIBLE INVESTMENTS
dc.subjectMARGINAL COST OF ELECTRICITY
dc.subjectMARGINAL GENERATION
dc.subjectMARGINAL GENERATION COST
dc.subjectMARKET PRICES
dc.subjectMEMBER STATES
dc.subjectMONOPOLY
dc.subjectNATURAL GAS
dc.subjectNATURAL GAS CONSUMPTION
dc.subjectNATURAL GAS OUTPUT
dc.subjectNATURAL GAS PRICES
dc.subjectNATURAL RESOURCES
dc.subjectNUCLEAR ELECTRICITY
dc.subjectNUCLEAR ENERGY
dc.subjectNUCLEAR FUEL
dc.subjectNUCLEAR GENERATION
dc.subjectNUCLEAR PLANTS
dc.subjectNUCLEAR POWER
dc.subjectOIL
dc.subjectOIL PRICE
dc.subjectOIL PRICES
dc.subjectOIL REFINERIES
dc.subjectPETROLEUM
dc.subjectPOLLUTION
dc.subjectPOTENTIAL DEMAND
dc.subjectPOWER
dc.subjectPOWER GRID
dc.subjectPOWER PRODUCERS
dc.subjectPOWER SECTOR
dc.subjectPRICE CHANGES
dc.subjectPRICE ELASTICITY
dc.subjectPRICES OF FUELS
dc.subjectPRICING MODEL
dc.subjectPRIMARY ENERGY
dc.subjectPRIMARY FUEL
dc.subjectPRODUCTION OF ELECTRICITY
dc.subjectPURCHASING
dc.subjectREDUCTION IN CARBON
dc.subjectRENEWABLE ELECTRICITY
dc.subjectRENEWABLE ENERGY
dc.subjectRENEWABLE ENERGY CAPACITY
dc.subjectRENEWABLE ENERGY GENERATION
dc.subjectRENEWABLE ENERGY RESOURCES
dc.subjectRENEWABLE GENERATION
dc.subjectRENEWABLE RESOURCES
dc.subjectRENEWABLE SOURCES
dc.subjectSALES
dc.subjectSPOT PRICES
dc.subjectSTOCKS
dc.subjectSUBSTITUTES
dc.subjectSULFUR
dc.subjectSULFUR DIOXIDE
dc.subjectSURPLUS
dc.subjectTHERMAL EFFICIENCY
dc.subjectWHOLESALE PRICES
dc.subjectWIND
dc.titleSubstitution and Technological Change under Carbon Cap and Trade : Lessons from Europeen
dspace.entity.typePublication
okr.crossref.titleSubstitution And Technological Change Under Carbon Cap And Trade: Lessons From Europe
okr.date.doiregistration2025-04-10T12:16:41.619111Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090608131814
okr.globalpracticeEnergy and Extractives
okr.guid749891468282311832
okr.identifier.doi10.1596/1813-9450-4957
okr.identifier.externaldocumentum000158349_20090608131814
okr.identifier.internaldocumentum10644229
okr.identifier.reportWPS4957
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2009/06/08/000158349_20090608131814/Rendered/PDF/WPS4957.pdfen
okr.region.administrativeEurope and Central Asia
okr.region.administrativeEurope and Central Asia
okr.topicEnergy::Energy Production and Transportation
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
relation.isAuthorOfPublicationccfad8dc-1a1e-50df-9b84-ea4470d50b39
relation.isAuthorOfPublication.latestForDiscoveryccfad8dc-1a1e-50df-9b84-ea4470d50b39
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
Files
Original bundle
Now showing 1 - 2 of 2
Thumbnail Image
Name:
WPS4957.pdf
Size:
358.02 KB
Format:
Adobe Portable Document Format
Download
No Thumbnail Available
Name:
WPS4957.txt
Size:
96.87 KB
Format:
Plain Text
Download
License bundle
Now showing 1 - 1 of 1
No Thumbnail Available
Name:
license.txt
Size:
1.71 KB
Format:
Plain Text
Description:
Download
Collections
Policy Research Working Papers