Short Term Electric Production Technology Switching Under Carbon Cap and Trade
This study examines fuel switching in electricity production following the introduction of the European Union's Emissions Trading System (EU ETS) for greenhouse gas emissions. A short-run restricted cost equation is estimated with carbon permits, high-carbon fuels, and low carbon fuels as variable inputs. Shadow values and substitution elasticities for carbon-free energy resources from nuclear, hydroelectric and renewable sources are imputed from the cost equation. The empirical analysis examines 12 European countries using monthly data on fuel use, prices, and electricity generation during the ...
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