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Analysing Carbon Pass-Through Rate Mechanism in the Electricity Sector: Evidence from Greece

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  • Dagoumas, Athanasios
  • Polemis, Michael

Abstract

In this study, we shed light into the carbon pass-through rate mechanism to wholesale prices in the Greek electric market. For this reason, we utilize a rich micro-level panel, including hourly data for 23 power plants spanning the period January 2014 to December 2017. In order to study the pass-through of emissions costs to wholesale electricity prices, we used an instrumental variable methodology. Our findings survived several robustness checks, accounting for logged linear and non-linear econometric specifications. Moreover, they are in alignment with the relevant recent literature, indicating the existence of an almost complete pass-through rate mechanism. This means that electricity firms almost fully internalize the cost of CO2 permits, incurring important policy implications to policy makers and government officials.

Suggested Citation

  • Dagoumas, Athanasios & Polemis, Michael, 2018. "Analysing Carbon Pass-Through Rate Mechanism in the Electricity Sector: Evidence from Greece," MPRA Paper 91067, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:91067
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    More about this item

    Keywords

    Emissions; CO2 permits; Pass-through; Instrumental variable; Electricity industry;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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