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Co2 Abatement and Fuel Mix in German Electric Power Generation — Is the “Ecological Electricity Tax†Ecologically Effective?

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  • Harald Tauchmann

    (Rheinisch Westfälisches Institut für Wirtschaftsforschung, Essen)

Abstract

This paper analyzes the effect of a potential carbon tax on inter-fuel substitution in the electric power sector in Germany. By analyzing firm level panel data (1980–1998), we show that the fuel mix as used by power plants is price inelastic. That means that differential fuel taxes, e.g. a carbon tax, will not induce inter-fuel substitution towards less carbon intensive fuels. This in turn means that the recent introduction in Germany of an electricity tax cannot be judged less effective than the hypothetical introduction of a carbon tax with respect to power related CO 2 emissions. It is likely, however, that in the course of the deregulation of the German power sector a carbon tax will become significantly more effective than an electricity tax.

Suggested Citation

  • Harald Tauchmann, 2005. "Co2 Abatement and Fuel Mix in German Electric Power Generation — Is the “Ecological Electricity Tax†Ecologically Effective?," Energy & Environment, , vol. 16(2), pages 255-271, March.
    • Handle: RePEc:sae:engenv:v:16:y:2005:i:2:p:255-271
    DOI: 10.1260/0958305053749561
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    References listed on IDEAS

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    Cited by:

    1. Mikael Linden, Matti Makela, and Jussi Uusivuori, 2013. "Fuel Input Substitution under Tradable Carbon Permits System: Evidence from Finnish Energy Plants 2005-2008," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    2. Tauchmann, H., 2006. "Firing the furnace? An econometric analysis of utilities' fuel choice," Energy Policy, Elsevier, vol. 34(18), pages 3898-3909, December.

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