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Assessing the implementation of the Market Stability Reserve

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Date
2018
Dewey
Economie industrielle
Sujet
ETS; Market Stability Reserve; MSR; Banking
JEL code
L.L1.L13; D.D4.D43; Q.Q2.Q28
Journal issue
Energy Policy
Volume
118
Publication date
07-2018
Article pages
642-654
Publisher
Elsevier
DOI
http://dx.doi.org/10.1016/j.enpol.2018.03.027
URI
https://basepub.dauphine.fr/handle/123456789/20075
Collections
  • LEDa : Publications
Metadata
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Author
Chaton, Corinne
98564 Laboratoire de Finance des Marchés d'Energie [FiME Lab]
Creti, Anna
status unknown
Sanin, María-Eugenia
19169 Centre d'Etudes des Politiques Economiques [EPEE]
Type
Article accepté pour publication ou publié
Abstract (EN)
In October 2015 the European Parliament has established a Market Stability Reserve (MSR) in the Phase 4 of the EU-ETS, as part of the 2030 framework for climate policies. In this paper we model the EU-ETS in presence of the Market Stability Reserve (MSR) as it is defined by that decision and investigate the impact that such a measure has in terms of permits price, output production and banking strategies. To do so we build an inter-temporal model in which polluting firms competing in an homogeneous good market are price takers in a permits market and face an uncertain demand. Our main finding is that the MSR succeeds in increasing the permits' price correcting an excess supply (and conversely decreasing it in case of excess demand). However, when the output demand is stochastic, the MSR may alter the arbitrage conditions that determine permits' prices. In some cases which depend on the extend of the demand variation, unintended effects on the price pattern appear. This in turns may adversely affect welfare.

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