Abstract
Introducing climate change policies such as carbon pricing can bring substantial costs for fossil-fuel-fired electricity generators, with incumbents often granted a transitional allocation of free emission permits. The free allocation of emission permits and the pass-through of carbon prices to higher electricity prices has created substantial concern that these policies allow emissions-intensive firms to reap windfall profits. We use the implementation and later repeal of Australia's price on carbon to show that coal-fired plants which received free permits had a substantial increase in their profits. This result supports calls for any transitional climate policy assistance to be tied to projected pass-through rates in order to avoid creating wealth transfers from taxpayers to emission-intensive generator owners.
Original language | English |
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Article number | 106629 |
Number of pages | 10 |
Journal | Energy Economics |
Volume | 121 |
DOIs | |
Publication status | Published - May 2023 |
Keywords
- Cost pass-through
- Electric utilities
- Energy and environmental policy
- Environmental taxes
- Policy grandfathering