| Title | Carbon Trading Under The Eu Ets And Energy Prices: A Case Of The Czech Republic |
|---|---|
| ID_Doc | 68818 |
| Authors | Vondrusková, B; Nemcová, I; Horák, J |
| Title | Carbon Trading Under The Eu Ets And Energy Prices: A Case Of The Czech Republic |
| Year | 2010 |
| Published | Politicke Vedy, 13, 4 |
| Abstract | Climate change is quite generally perceived as one of greatest threats that our planet together with all human beings will have to face in future. It has been proven that if the Earth's temperature rises by more than 2 degrees C above pre-industrial levels, climate change is likely to become irreversible and the long-term consequences could be immense (for details see e.g. Stern, 2006). On the other hand, if one takes an early action, climate change might be rather a challenge than a threat. It may be the impulse needed in order to turn the existing economic order on a more sustainable, low-carbon and energy- efficient path. In this respect the European Union introduced the Emission Trading Scheme (ETS). It came into operation in January 2005 as the largest multi-country, multi-sector GHG trading system world-wide. Initially it was considered to help the European Union to meet its Kyoto commitment but in the course of time it has developed into a more ambitious system enabling the European Union to tame its emissions for at least the next decade. The system is a kind of cap-and-trade system, i.e. it is based on a given cap on emissions and trade in emission allowances and thus gives value to reducing CO2 emissions. A key achievement is the ability of the system to put a price on carbon. Like any market, the key to pricing is scarcity, and the price depends on both the stringency of a cap (the absolute quantity of allowances available), the demand for allowances and expectations about the future. The most fundamental difference of trading in emissions from any other type of market is that the amount available depends directly on government decisions about allocations; and expectations about the future are largely expectations about future emission targets (Grubb, Neuhoff 2006). The new regulatory scheme is deemed to have serious implications for European business and may transform the way business is done in the power and heat sector, as well as in other relevant industries. That is why the authors decided to try to deal with this issue; however, due to clear limits on the data availability they will centre their attention exclusively on the case of the Czech Republic. The authors consider this paper a theoretic exercise enabling them to explore the possibility to build a simple model, the aim of which is to draw relevant conclusions about the impacts of the introduction of the ETS system in the Czech Republic. The model should actually describe, through calculating the change in the prices of electricity, the impact of the ETS primarily on power sectors and consequently on the other sectors covered in the ETS. |
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