1 OFGEM DISCUSSION DAY ON ‘EMISSIONS TRADING: IMPACTS ON ELECTRICITY CONSUMERS’

price of emission allowances might be; how the generators might respond to this price; to what extent generators and suppliers will pass through any allowance prices and cost increases; and what will be the subsequent impacts on consumers, both businesses and households. The EU ETS involves about 10,000 installations in the energy and energy-intensive industrial sectors, which are together responsible for about 50 % of EU carbon dioxide emissions. Emission allowances have been allocated in EU Member States on the basis of National Allocation Plans (NAPs). The first Phase of the scheme runs from 2005-07. The price of emission allowances depends on a number factors, including the initial allocation, international linkages outside the EU, economic growth, the treatment of new entrants, and the cost of abatement. Typical estimates of the price of emission allowances in the paper are €5-10/tCO2 over 2005-07, and €10-15/tCO2 from 2008-12. However, it should be noted that prices are very volatile. At the time of the seminar they were €8/tCO2 but by the end of June 2005 they had risen to €23/tCO2. They may well go back down again. The EU ETS will result in both gains and losses for companies. Net gainers will be those firms which have low emissions relative to their initial allocation, low costs of abatement, an ability t