“Set Aside” can have substantial budget effects

As of 2013, about half the carbon emission allowances for the energy companies and industry will be auctioned instead of being freely granted . The Netherlands can also auction a part of these allowances within the European emission cap. Because of the current recession there is a surplus in emission allowances and therefore the price of the allowances is very low at the moment. The European Commission has proposed to temporarily remove an amount of these emission allowances from the market, as to raise the price for emitting CO₂. From an analysis conducted at ECN, it is expected that  for the complete period of 2013-2020, the proposed action will only have a minor effect on the allowance price, and therefore the auction revenues will not increase significantly.

Only if a large amount of emission allowances will be taken out of the system permanently, the carbon prices will effectively go up. ECN has calculated that the effects of that measure would generate billions for the Dutch government budget. The auction revenues will rise because of the increase in prices, even though the total auctioned amount would be less. Because of the higher allowance price power prices will rise which makes funding for renewable power less costly. On the other hand,  the rise in the price of emission allowances will increase the energy costs of companies and households. This could make investments in energy efficiency more viable.

For more information on this topic, you can contact Ton van Dril : vandril@ecn.nl

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