CLIMATECHANGE38/2021GermanEnvironmentAgencyEmissionstradinginpursuitofelectricitydecarbonisation-marketstructuresandregulationsmatterCLIMATECHANGE38/2021RessortforschungsplanoftheFederalMinistryfortheEnviroment,NatureConservationandNuclearSafetyProjectNo.(FKZ)3718420020ReportNo.FB000418/ZW,5,ENGEmissionstradinginpursuitofelectricitydecarbonisation-marketstructuresandregulationsmatterSynthesisreportAuthorsWilliamAcworth,ErnstKunemanadelphi,BerlinAnatoleBouteTheChineseUniversityHongKong,HongKongReginaBetzZurichUniversityofAppliedSciences,WinterthurProjectteamStephanieLaHozTheuer,WilliamAcworth,ErnstKunemanReginaBetz,AnatoleBoute,HaoZhang,JakobGraichenJanAbrell,MirjamKosch,CarolinaInclan,ChristopherKardish,TobiasBernstein,MichaelMehling,JuliaBaer,TobiasMüller,RainerBaisch,JohannaCludius,SeanHealyOnbehalfoftheGermanEnvironmentAgency4ImprintPublisherUmweltbundesamtWörlitzerPlatz106844Dessau-RoßlauTel:+49340-2103-0Fax:+49340-2103-2285buergerservice@uba.deInternet:www.umweltbundesamt.de/umweltbundesamt.de/umweltbundesamtReportperformedby:adelphiresearchgemeinnützigeGmbHAlt-Moabit9110559BerlinGermanyReportcompletedin:February2021Editedby:SectionV3.3EconomicAspectsofEmissionsTrading,Monitoring,EvaluationClaudiaGibisPublicationaspdf:http://www.umweltbundesamt.de/publikationenISSN1862-4804Dessau-Roßlau,May2021Theresponsibilityforthecontentofthispublicationlieswiththeauthor(s).CLIMATECHANGEEmissionstradinginpursuitofelectricitydecarbonisation-marketstructuresandregulationsmatter-5Abstract:Emissionstradinginpursuitofelectricitydecarbonisation-marketstructuresandregulationsmatterThisreportassessestheroleofemissionstradingsystems(ETS)inelectricitysectordecarbonisationthroughanalysesofcarbonmarketdesignsandinteractionswithelectricitymarketregulations,marketstructuresandadditionalpolicies.Wedosothroughthelensoffourcarbonpricequalitycriteria(volatility,reflectionofmarginalabatementcost,predictability,andenvironmentaleffectiveness)andthreeabatementchannels(cleandispatch,low-carboninvestment,anddemand-sideresponse).TheanalyticalframeworkoriginatesfromanearlierconceptualstudyandhasbeenappliedtofivecasestudiescomprisingsevenjurisdictionsintheAmericas,Europe,andAsia.WefindthatETSsareespeciallyeffectiveincapitalisingonshort-termabatementopportunitieswhenembeddedwithinliberalisedelectricitymarkets(e.g.,meritordereffectsorfuelswitching).Inthiscontext,theymayalsosendlong-termsignalsonfuelchoicesandinvestmentdecisions;however,thestrengthofthesesignalswilldependonETSdesignandcompanionpolicies.ETSscanalsobedesignedtocatertohybridelectricitymarketswherecarboncostpassthroughmightinitiallybeabsent.Limitedpassthroughtoindustrialconsumersanddilutedpricesignalsinfinalelectricitybillscanresultinuntappedmitigationpotentialandrequirecarefulassessmentacrosssystems.Moreover,pathdependencyintermsofpreviousinvestmentsinthesectortoacertainextentpreordaintheabatementoptionsthatcanbeinducedbytheETSintheshorttomid-term.Overall,ETSsformanincreasinglyindispensabletoolinthepolicytoolkit,assistingjurisdictionsintheirtransitiontonet-zeroelectricityproduction.Kurzbeschreibung:EmissionshandelzurDekarbonisierungdesElektrizitätssektors-Marktstrukturenund-regulierungsindwichtigDieserBerichtuntersuchtdieRollevonEmissionshandelssystemen(EHS)beiderDekarbonisierungdesElektrizitätssektorsdurchAnalysenderDesignmerkmalevonCO2...