Relation of CO2 emission allowance prices and electricity prices in Poland in 2013-2020

Abstract

This paper investigates the relation between the prices of CO2 emission allowances in the EU ETS (Emission Trading System), and wholesale prices of electricity in Poland. Linear regression models were used to assess carbon price pass-through rate to wholesale electricity prices during the entire III phase of ETS (2013-20). It has been found out that the entire cost of CO2 emission allowances was included in wholesale electricity price. As expected, the peak transmission parameter is higher than the off-peak one. Nevertheless the difference is small, and statistically insignificant, hence the model does not allow for any far-reaching conclusions in this regard. Results show, that electricity producers were able to pass the entire emission related costs to the customers, which might rise a question whether EU ETS is an effective tool to give sufficient incentives to decarbonise electricity production.