Economic and environmental consequences of market power in the South-East Europe regional electricity market
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A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
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Date
2020
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Language
en
Pages
26
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Energy Journal, Volume 42, issue 6, pp. 121-146
Abstract
Market power in electricity and emission-permit markets in the South-East Europe Regional Electricity Market, which comprises both EU members subject to the EU Emissions Trading System (ETS) and non-EU members exempt from it, affects social welfare and carbon leakage. We examine its impact under three market settings: perfect competition (PC) and two leader-follower versions, in which a leader can exert market power in either the electricity market (S-T) or both the electricity and permit markets (S). Under PC, carbon leakage is equal to 11%-39% of ETS emission reduction depending on the cap stringency. Generally, in S-T, the leader’s capacity withholding results in ETS emissions below and non-ETS emissions above PC levels. However, carbon leakage is lower vis-à-vis PC as the ETS emission reduction offsets the non-ETS emission increase. Finally, in S, the leader’s propensity to lower the permit price increases ETS emissions and exacerbates carbon leakage compared to S-T.Description
Keywords
Bi-level model, Carbon leakage, Energy Community, EU ETS, Market power
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Citation
Višković, V, Chen, Y, Siddiqui, A S & Tanaka, M 2020, ' Economic and environmental consequences of market power in the South-East Europe regional electricity market ', Energy Journal, vol. 42, no. 6, pp. 121-146 . https://doi.org/10.5547/01956574.42.6.VVIS