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Has the EU-ETS Financed the Energy Transition of the Italian Power System?
Content Provider | MDPI |
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Author | Caporin, Massimiliano Fontini, Fulvio Segato, Samuele |
Copyright Year | 2021 |
Description | This paper focuses on the relationship between the European Union Emission Trading System allowances’ prices and the Italian electricity price, aiming at assessing whether such a mechanism has been a driver for the decarbonization of the power sector. To this aim, we calculate the long-run relationships between energy prices, natural gas prices and allowances’ prices, through a VECM model, distinguishing between peak and off-peak prices. The analysis is carried out for the third phase of the EU-ETS, which started in 2013, and for two-year rolling windows that account for changes over time of the pass-through rates. It is shown that the natural gas price has a high pass-through rate of roughly 70%, which is increasing over time. On the contrary, the pass-through rate of the allowances’ price is as low as 7% for the wholesale electricity price, being slightly more and less for the peak and off-peak prices, respectively. However, this rate has been substantially changing over time, starting from a high level and falling significantly, becoming negative in the recent years. This could signal that the EU-ETS has been increasingly more effective in endogenizing emission costs for power producers, inducing them to reduce their production costs associated with emissions by means of a change in technologies. However, the analysis of the impulse response functions hardly supports this finding, eventually casting doubts on the effectiveness of the EU-ETS in Italy to drive the transition toward a less carbon-intensive power supply. |
Starting Page | 71 |
e-ISSN | 22277072 |
DOI | 10.3390/ijfs9040071 |
Journal | International Journal of Financial Studies |
Issue Number | 4 |
Volume Number | 9 |
Language | English |
Publisher | MDPI |
Publisher Date | 2021-12-14 |
Access Restriction | Open |
Subject Keyword | International Journal of Financial Studies Industrial Engineering Pass-through Electricity Price Eu-ets Vecm Italian Power Market |
Content Type | Text |
Resource Type | Article |