The Zonal and Seasonal CO2 Marginal Emissions Factors for the Italian Power Market

Abstract

This paper estimates the seasonal and zonal \({\mathrm{CO}}_{2}\) marginal emissions factors (MEFs) from electricity production in the Italian electricity system. The inclusion of the zonal configuration of the Italian wholesale power market leads to a complete measurement of marginal emission factors which takes into account the heterogeneous distribution of RES power plants, their penetration rate and their variability within the zonal power generation mix. This article relies on a flexible econometric approach that includes the fractional cointegration methodology to incorporate the typical features of long-memory processes into the estimation of MEFs. We find high variability in annual MEFs estimated at the zonal level. Sardinia reports the highest MEF (0.7189 \({\mathrm{tCO}}_{2}\)/MWh), followed by the Center South (0.7022 \({\mathrm{tCO}}_{2}\)/MWh), the Center North (0.4236 \({\mathrm{tCO}}_{2}\)/MWh), the North (0.2018 \({\mathrm{tCO}}_{2}\)/MWh) and Sicily (0.146 \({\mathrm{tCO}}_{2}\)/MWh). The seasonal analysis also shows a large variability of MEFs in each zone across time. The heterogeneity of results leads us to recommend that policymakers consider the zonal configuration of the power market and the large seasonal variability related to carbon emissions and electricity generation when designing incentives for renewable energy sources expansion and for achieving emission reduction targets.