Tuesday, October 2, 2007

EU-ETS design seems to have satisfied interests of energy producers at the cost of energy consumers: GHG allowances at no cost

The Euro­pean Commission has not been able to align the interests of all affected industries and the design of the EU-ETS particularly seemed to have satisfied the inter­ests of energy producers at the cost of energy con­sumers, wrote J Pinkse and A Kolk in European Management Journal (27/9/2007).

Passing-off prices: “To illustrate, in the first trading period (2005-2007) of the EU-ETS, allowances to emit GHGs have been allocated at no cost. This has particularly benefited energy producers because they have been able to pass through the price of these allowances to their clients, even though they did not pay for these allowances themselves.

This outcome is not surprising given the fact that the energy producers’ voice has been heard most clearly in the political negotiations surrounding the EU-ETS. Nevertheless, it leaves large consumers of energy dissatisfied, which gives them an incentive to try to change the current institutional arrangements....MORE from Green Markets