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Leakage from sub-national climate policy: The case of California’s cap–and–trade program

Justin Caron, Sebastian Rausch, and Niven Winchester

Year: 2015
Volume: Volume 36
Number: Number 2
DOI: 10.5547/01956574.36.2.8
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Abstract:
With federal policies to curb carbon emissions stagnating in the U.S., California is taking action alone. Sub-national policies can lead to high rates of emissions leakage to other regions as state-level economies are closely connected, including integration of electricity markets. Using a calibrated general equilibrium model, we estimate that California's cap-and-trade program without restrictions on imported electricity increases out-of-state emissions by 45% of the domestic reduction. When imported electricity is included in the cap and "resource shuffling" is banned, as set out in California's legislation, emissions reductions in electricity exporting states partially offset leakage elsewhere and overall leakage is 9%.



Cross-border Effects of Capacity Remuneration Mechanisms: The Swiss Case

Florian Zimmermann, Andreas Bublitz, Dogan Keles, and Wolf Fichtner

Year: 2021
Volume: Volume 42
Number: Number 2
DOI: 10.5547/01956574.42.2.fzim
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Abstract:
In this article, cross-border effects of different market design options are analyzed using Switzerland, which is strongly interconnected to larger neighboring markets, as a case study. An investigation is conducted with an agent-based model where in one scenario, all market designs are represented according to the current legislation, and in another, energy-only markets (EOM) are assumed in all considered countries. The results show that wholesale electricity prices are highly dependent on the chosen market design and in the annual average are up to 27% higher in the EOM scenario. Due to expected larger interconnector capacities, this increase is evident in all simulated markets. Furthermore, the results indicate that the planned market design changes in the neighboring countries decrease investments in Switzerland. However, generation adequacy is still guaranteed due to the high Swiss hydropower storage capacity. Our results suggest that, under the current circumstances, a domestic mechanism in Switzerland is not required.



Cross-border Effects between the Spanish and French Electricity Markets: Asymmetric Dynamics and Benefits in the Light of European Market Integration

Ignacio Mas Urquijo and Florentina Paraschiv

Year: 2023
Volume: Volume 44
Number: Number 4
DOI: 10.5547/01956574.44.4.imas
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Abstract:
We investigate cross-border dynamics between the Spanish and French electricity markets in the light of EU's market integration. The analysis is highly relevant given the isolation of the Iberian Peninsula from the rest of European markets and its unique electricity market design. Results show the shift in the merit order curve in each market. Electricity prices in Spain follow the dynamics of the French ones, fostered by Spain's import-dependence. Benefits of grid integration are asymmetric, with Spanish users taking advantage of the market integration with France. The substitution effect between domestic fuel-based units and imported green electricity allows Spain to further decarbonize its energy mix and increase the security of supply. The expansion of the cross-border grid until 2030 will be key for a successful phasing out of the remaining coal-based units. Our findings should be considered in support schemes for integration projects to align the incentives of participants.





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