THE IMPACT OF THE EU EMISSIONS TRADING SYSTEM ON CO2 INTENSITY IN ELECTRICITY GENERATION

The primary objective of EU Emissions Trading System (EU-ETS) is to reduce CO2-emissions. We study the effect of the EU-ETS on CO2-intensity of Swedish electricity generation, using an econometric time series analysis on weekly data for the period 2004–2008. We control for effects of other input prices and hydropower reservoir levels. Our results do not indicate any link between the price of EU-ETS and the CO2-intensity. The most likely reasons to explain this is that emission reductions are generally cheaper in other sectors and that other determinants of fossil fuel use diminish the effects of the EU-ETS