IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v29y2008i1_supplp63-76.html
   My bibliography  Save this article

New Entrant and Closure Provisions: How do they Distort?

Author

Listed:
  • A. Denny Ellerman

Abstract

Provisions to endow new entrants with free allowances and to require closed facilities to forfeit allowance endowments are ubiquitous in the EU Emissions Trading Scheme, but a new design feature in cap-and-trade systems. This essay seeks to explore, within a comparative statics framework, the effect of these provisions on agent behavior in output and emissions markets assuming profit maximization. The main conclusion is that the principal effect is on capacity. The effect of the resulting over-capacity on output markets is to reduce output price and to increase output. The effect on emissions markets is more ambiguous in that it depends on the emission characteristics of the new capacity, existing capacity, and the capacity not retired, and the distribution of the excess capacity among these categories.

Suggested Citation

  • A. Denny Ellerman, 2008. "New Entrant and Closure Provisions: How do they Distort?," The Energy Journal, , vol. 29(1_suppl), pages 63-76, June.
  • Handle: RePEc:sae:enejou:v:29:y:2008:i:1_suppl:p:63-76
    DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI-5
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/ISSN0195-6574-EJ-Vol29-NoSI-5
    Download Restriction: no

    File URL: https://libkey.io/10.5547/ISSN0195-6574-EJ-Vol29-NoSI-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Karsten Neuhoff & Kim Keats Martinez & Misato Sato, 2006. "Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 73-91, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hu, Hui & Qi, Shaozhou & Chen, Yuanzhi, 2023. "Using green technology for a better tomorrow: How enterprises and government utilize the carbon trading system and incentive policies," China Economic Review, Elsevier, vol. 78(C).
    2. Meunier, Guy & Ponssard, Jean-Pierre & Quirion, Philippe, 2014. "Carbon leakage and capacity-based allocations: Is the EU right?," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 262-279.
    3. Anger, Niels & Oberndorfer, Ulrich, 2008. "Firm performance and employment in the EU emissions trading scheme: An empirical assessment for Germany," Energy Policy, Elsevier, vol. 36(1), pages 12-22, January.
    4. Johan Eyckmans & Cathrine Hagem, 2009. "The European Union's Potential for Strategic Emissions Trading through Minimal Permit Sale Contracts," CESifo Working Paper Series 2809, CESifo.
    5. Anke, Carl-Philipp & Hobbie, Hannes & Schreiber, Steffi & Möst, Dominik, 2020. "Coal phase-outs and carbon prices: Interactions between EU emission trading and national carbon mitigation policies," Energy Policy, Elsevier, vol. 144(C).
    6. Jean-Philippe Nicolaï & Jorge Zamorano, 2018. "Windfall Profits Under Pollution Permits and Output-Based Allocation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(4), pages 661-691, April.
    7. Blanca Moreno & María T García-à lvarez, 2017. "Analyzing the impact of fossil fuel import reliance on electricity prices: The case of the Iberian Electricity Market," Energy & Environment, , vol. 28(7), pages 687-705, November.
    8. Rogge, Karoline S. & Hoffmann, Volker H., 2009. "The impact of the EU ETS on the sectoral innovation system for power generation technologies: findings for Germany," Working Papers "Sustainability and Innovation" S2/2009, Fraunhofer Institute for Systems and Innovation Research (ISI).
    9. Barry Anderson & Corrado Di Maria, 2011. "Abatement and Allocation in the Pilot Phase of the EU ETS," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(1), pages 83-103, January.
    10. Misato Sato & Karsten Neuhoff & Verena Graichen & Katja Schumacher & Felix Matthes, 2013. "Sectors under scrutiny � Evaluation of indicators to assess the risk of carbon leakage in the UK and Germany," GRI Working Papers 113, Grantham Research Institute on Climate Change and the Environment.
    11. Quande Qin & Huangda He & Li Li & Ling-Yun He, 2020. "A Novel Decomposition-Ensemble Based Carbon Price Forecasting Model Integrated with Local Polynomial Prediction," Computational Economics, Springer;Society for Computational Economics, vol. 55(4), pages 1249-1273, April.
    12. Frédéric Branger & Jean-Pierre Ponssard & Oliver Sartor & Misato Sato, 2015. "EU ETS, Free Allocations, and Activity Level Thresholds: The Devil Lies in the Details," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(3), pages 401-437.
    13. Chu, Junfei & Hou, Tianteng & Li, Feng & Yuan, Zhe, 2024. "Dynamic bargaining game DEA carbon emissions abatement allocation and the Nash equilibrium," Energy Economics, Elsevier, vol. 134(C).
    14. Misato Sato & Karsten Neuhoff & Verena Graichen & Katja Schumacher & Felix Matthes, 2015. "Sectors Under Scrutiny: Evaluation of Indicators to Assess the Risk of Carbon Leakage in the UK and Germany," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 99-124, January.
    15. Cotton, Deborah & De Mello, Lurion, 2014. "Econometric analysis of Australian emissions markets and electricity prices," Energy Policy, Elsevier, vol. 74(C), pages 475-485.
    16. Jurate Jaraite-Ka~ukauske and Corrado Di Maria, 2016. "Did the EU ETS Make a Difference? An Empirical Assessment Using Lithuanian Firm-Level Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    17. Hintermann, Beat, 2010. "Allowance price drivers in the first phase of the EU ETS," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 43-56, January.
    18. Dechezleprêtre, Antoine & Nachtigall, Daniel & Venmans, Frank, 2023. "The joint impact of the European Union emissions trading system on carbon emissions and economic performance," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    19. Zhou, P. & Wang, M., 2016. "Carbon dioxide emissions allocation: A review," Ecological Economics, Elsevier, vol. 125(C), pages 47-59.
    20. Yuanguang Yu, 2012. "An Optimal Ad Valorem Tax/Subsidy with an Output-Based Refunded Emission Payment for Permits Auction in an Oligopoly Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 52(2), pages 235-248, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:29:y:2008:i:1_suppl:p:63-76. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.