Tim Hoffmann

Assessing Emission Regulation in Europe: An Interactive Simulation Approach

Implementation of an EU-wide emissions trading system by means of National Allocation Plans is at the core of European environmental policy agenda. Member States are faced with the problem of allocating their national emission budgets under the EU Burden Sharing Agreement between energy-intensive sectors that are eligible for international emissions trading and the remaining segments of their economies that will be subject to complementary domestic emission regulation. The country-specific segmentation of national emission budgets between trading sectors and non-trading sectors will determine the cost efficiency of the EU emissions trading system and the gains for each Member State vis-a-vis domestic abatement policies. We present an interactive simulation model where users can specify the design of National Allocation Plans for each EU Member State and then evaluate the induced economic effects. Our numerical framework is based on marginal abatement cost curves for (emissions) trading and non-trading sectors of the EU-15 economies. Illustrative simulations highlight the importance of a coordinated design of National Allocation Plans in order to avoid substantial excess costs of regulation and drastic burden shifting between nontrading and trading sectors.

The cost of phasing out nuclear power: a quantitative assessment of alternative scenarios for Germany

In the debate on the premature phase-out of nuclear power generation in Germany, there is an intense dispute on the effective operating time for the existing nuclear power plants. This paper addresses the question of how alternative phase-out regulations affect both the magnitude of total economic costs and the distribution of these costs across nuclear power plants and competing companies. Based on a dynamic partial equilibrium analysis of power supply options, we quantify the excess costs of different regulatory approaches as a function over time and investigate the implied competitive effects at the plant as well as at the company level. We find that alternative phase-out regulations which effectively lead to the same date for an ultimate shutdown of nuclear power generation exhibit large differences in total costs. The competitive distortions across companies also vary considerably with the chosen regulation depending on how the respective cost implications at the plant level get distributed at the company level via the specific ownership. Our quantitative results refer to nuclear phase-out scenarios for Germany and its specific plant structure as well as plant-ownership by companies. However, the issues and methodological approaches presented in this paper may be important for other industrialized countries which also contemplate a premature nuclear phase-out.

What Drives the Efficiency of Hard Coal Fuelled Electricity Generation? An Empirical Assessment

The efficiency of electricity generation in hard coal fired power plants varies considerably from country to country and over time. These differences occur both between developing and developed countries and between industrialised nations. The econometric analysis presented in this paper tests for the reasons of these discrepancies. In this examination abundance of hard coal and the price of hard coal are the two variables of our major interest. We assume that countries with an abundance of hard coal or relatively low costs of extraction show smaller degrees of efficiency than countries with poor deposits of this resource because the latter nations have a stronger dependency on efficient power plants than the former. Furthermore, higher prices should lead to more efficient electricity generation since production costs increase with growing hard coal prices. Our findings partially confirm these hypotheses and suggest that, among the chosen explanatory variables, hard coal abundance or the accessibility of hard coal, respectively, the hard coal price, the level of foreign direct investment inflows as well as the average power plant age are identified as principal drivers of power plant efficiency. From an environmental policy perspective we conclude that flexible policy instruments which internalise external effects caused by emissions as well as support for foreign investments are important means to foster energy efficiency. However, economic efficiency - even if contrasting with energy efficiency - must not be neglected in the design of energy policies.