Public Power - January/February 2009 - (Page 39)

result, the CO2 allowance pass-through rate for coal-generated power is over-estimated. Sijm and his co-authors also used the Comprehensive Market Power in Electricity Transmission and Energy Simulator (COMPETES) model to estimate pass-through costs for five EU nations. “Under all scenarios considered, power prices considered turn out to increase significantly due to CO2 emissions trading.” They added that the differences between countries—with estimated price increases highest in Germany and lowest in France—are the result of differences in fuel mix. The study suggests that increased electricity prices are not just the result of pass-through costs. However, the study also found that: “Model and empirical estimates of additional profits due to the EU ETS show that these ‘windfall profits’ may be very significant, depending on the price of CO2 and the assumptions made.” Phase II of the ETS began on Jan. 1, 2008, and will run through the end of 2012. Phase II is similar to Phase I in most respects, although there was a greater degree of centralized control over credit allocations. Also, the maximum auction amount was increased to 10 percent, though, once again, countries have elected to auction very few allowances. As was the case with Phase I, almost all credits will be freely allocated. The EU is considering major revisions to future phases of the ETS. In the next phase of the ETS, there will be a single, EU-wide cap on emissions be allowances rather than individual caps for each of the EU’s 27 members. The number of allowances auctioned will increase to 60 percent, and harmonized rules regarding free allocations will be implemented. New industries will be included in the ETS, and the program will cover emissions of gases such as nitrous oxide and perfluorocarbons. The auctions will be carried out by the member nations. The European Union’s rollout of the world’s most comprehensive carbon capand-trade system provides useful lessons for other nations considering implementing such a system, though caution must be used when analyzing it at this point. The first phase of the ETS was extremely experimental. Caps were set rather high, and individual member nations were permitted www.APPAnet.org to control their own allocations to a degree that will not be replicated in future ETS phases. With little background information to guide prices, the market fluctuated wildly, and after the recognition that there was significant over-allocation of allowances, the market practically disappeared. Future phases, which will involve stricter emissions standards, may provide a clearer picture of how the carbon market will function. Finally, though most analysts agree that certain firms benefited from windfall profits, the precise amount is almost impossible to determine. The next phase of the ETS might be a more useful guide to the effectiveness of this particular cap-and-trade system. ❚ Paul Zummo, PhD., is a research analyst in the Statistical & Analysis Department of the American Public Power Association. Proven Productive Committed Dependable Quick Proven Productive Committed Dependable Quick Proven Productive Committed Dependable Quick Proven Productive Committed Dependable Quick Proven Productive Committed Dependable Quick people for the job. Proven Productive Committed Dependable Quick Proven Productive Committed Dependable Quick Proven Productive Committed Dependable Quick Proven [Herbicide Application] [Substation Restoration and Maintenance] Clearing] Productive Committed Dependable Quick Proven Productive Committed Dependable Quick Whatever the situation, Proven Productive Committed Dependable Quick Proven Productive Committed Dependable Quick Productive Committed Dependable Quick Secure afe Precise Accurate Solid Reliable Employee Owned WRIGHT Call the [Line Clearance] [Mechanical Line Clearing] [Right-Of-Way Mowing] [Land an emergency or routine line clearance, our utility customers know they can count on Wright Tree Service to get the job done— safely, quickly, and efficiently. From the Pacific Ocean to the Great Lakes, from Canada to the tip of Texas, we’re the Wright people for the job! Trustworth P.O. Box 1718 Des Moines, IA 50306 1-800-882-1216 www.wrighttree.com January-February 2009 39 http://www.wrighttree.com http://www.APPAnet.org

Table of Contents Feed for the Digital Edition of Public Power - January/February 2009

Public Power - December 2008 Contents Perspective 10 Questions Heat or Eat? Achieving Excellence in Nuclear Operations Training Grand Ambitions for Wind Power Visions of Green Carbon Trading Across The Pond Reliability Green Energy Customer Service DEED Hometown Connections Parting Shot

Public Power - January/February 2009

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