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Impact of CO2 quota allocation to new entrants in the electricity market

Contents

Preface

Summary and conclusions

• Allocation to new entrants is an investment subsidy
• Model assumptions
• Impact on investments and CO2-emission
• Economic consequences
• Impacts on the price of CO2 in the EU ETS
• Targets for renewable energy
• Conclusions

Dansk resumé

1 Introduction

2 Methodology

3 The EU ETS

• 3.1 Fundamentals of the EU ETS
• 3.2 Allocation to new entrants
  • 3.2.1 Reserves
• 3.3 NAP changes from 2005-7 to 2008-2012
  • 3.3.1 Denmark
  • 3.3.2 Finland
  • 3.3.3 Germany
  • 3.3.4 Sweden

4 The electricity market - impacts of allocation to new entrants

• 4.1 Electricity spot-market
• 4.2 Investments in power plants

5 Model analyses

• 5.1 Modelling tool
• 5.2 Key assumptions
• 5.3 Welfare-economic losses
• 5.4 Investments in electricity generation capacity
• 5.5 Impact on electricity prices
• 5.6 Emitted CO2
• 5.7 Additional simulations
  • 5.7.1 Maintaining CO2-emissions at current levels
  • 5.7.2 Target for penetration of renewables
• 6 % discount rate

6 Summary of observations

7 Conclusion

8 References

Appendix A: Background paper on modelling tool and data assumptions

• Modelling tool
• Energy system assumptions
• References

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Version 1.0 June 2007, © Danish Environmental Protection Agency