CO2 Emission Allowances Research Articles

The dynamic causality in sporadic bursts between CO2 emission allowance prices and clean energy index.

This study examines the dynamic causality between the carbon emission market and the clean energy market, using an information flow-based, quantitative Liang causality analysis which is firmly grounded on physics and derived from first principles. The dynamic causal relationships between European Union Allowance (EUA) prices and clean energy index allow us to explore whether the causality in return or in variance from CO2 emission allowances to the clean energy index is time-varying. The results show that the causal relationships in return and in variance between EUA and Clean Energy Index (CEI) are drastically time-varying. For the causality in return, a significant unidirectional long-term and stable causality from CEI to EUA is identified after March 2020. For that in variance, a bidirectional causality is found after March 2020, but values after 2020 are opposite to those in return. It seems when fluctuations in the clean energy market are low, the clean energy market has a weak causal effect on the carbon emission market but when volatility in the clean energy market is increasing, causalities between the two markets are significantly strengthened. These results obtained through this rigorous causality analysis can serve as a reference for academics, market participants, and policymakers to understand the underlying links between EUA prices and clean energy index.

The Potential and Development of the Geothermal Energy Market in Poland and the Baltic States—Selected Aspects

The problem of rising energy prices stems from the weakening of economies operating in the realities of the COVID-19 coronavirus pandemic, as well as from the rising cost of CO2 emission allowances in connection with the European Union’s environmental policy. The outbreak of war in Ukraine has deepened the energy crisis in European countries, which, to a significant extent, benefit from hydrocarbon resources imported from Russia. This problem is particularly acute in countries that are heavily dependent on conventional forms of energy production (e.g., Poland). In light of the problems observed, the need to develop a market for renewable energy has become more urgent than ever. Although this problem affects a number of countries, the authors of the study decided that it is particularly important in the region of the countries neighbouring the line of the ongoing armed conflict in Ukraine, i.e., Poland and the Baltic States (Lithuania, Latvia and Estonia). The choice of the research area was determined by direct proximity to the examined countries, as well as the generally comparable social and economic conditions of Poland, Lithuania, Latvia and Estonia, which creates the basis for factual comparisons and conclusions. The main objective of the study was to assess the directions of the development of the geothermal energy market in Poland against the background of the Baltic States in the current economic conditions, together with an attempt to determine the most justified direction of geothermal energy development in Poland—with the strongest impact on increasing the share of RES in the energy system and limiting the increase in electricity prices in this country. Identification of solutions practiced in the geothermal energy market in Lithuania, Latvia and Estonia for comparative purposes (Poland region) was helpful in this respect. The subject of this study was oriented towards the diagnosis of the state of the geothermal energy market in the surveyed countries to determine the general directions of its development. Particular attention was paid to the study of needs and preferences in this field on the Polish market concerning individual users, which constitutes the basis of the research. The instruments required for carrying out the research work in the outlined scope were basically drawn from the area of economic analysis and evaluation of phenomena (multifaceted analysis including critical analysis of the literature, comparative analysis of research results, situational analysis of geothermal market), in comparison with the results of our own research (questionnaire survey) carried out on the Polish energy market (individual customers). The research revealed the strong position of Poland in the field of the development of deep and shallow geothermal energy in the area of the countries accepted for the study. The determinant of the above is the abundance in this country of easily accessible heat deposits of the Earth. In general, the actions taken by the surveyed countries in the field of geothermal development are of a similar nature (shallow geothermal heat pumps are the most developed), while, in the field of deep geothermal energy, an interesting observation is the orientation towards solutions based on the energy of crystalline rocks in Lithuania and Estonia, determined by the availability of such deposits in this region. Surveys indicate the growing awareness of the validity of efforts to extract energy from the earth. However, this problem still represents a major challenge (e.g., deep geothermal energy in Estonia), so indicating the role of geothermal energy in the energy market—especially in the area of the countries accepted for the survey—is an important and relevant topic.

Assesment of the Quality of Reporting Information on CO2 Emission Rights on the Example of Energy Sector Groups Listed on the Warsaw Stock Exchange

Abstract Poland is a participant to the European Union Emissions Trading System, which aims at reducing greenhouse gas emissions. Trading CO2 emission rights has become a strategic area from the point of view of managing entities that emit CO2. The aim of the paper is to investigate and identify discrepancies in the presentation and valuation of CO2 emission allowances, CO2 emission provision liabilities in reporting, and to assess the impact of these discrepancies on compliance with the true and fair view principle on top of the informative value of the financial statements. An in-depth qualitative analysis was used to examine disclosures of CO2 emission rights in the 2020 consolidated financial statements coming from the largest energy sector groups listed in the WIG Energy Index of the Warsaw Stock Exchange in light of the relevant legal acts and literature. As a result of the research conducted, it was confirmed that groups of companies carry out a range of CO2 emission rights balance classification and valuation. There were also significant discrepancies in the disclosure of information about the creation and valuation of provisions for liabilities due to CO2 emissions. The discrepancies observed in the audited entities’ balance-sheet presentations and valuation of the acquired CO2 emission allowances and reserves resulting from IAS/IFRS in practice distorts the comparability of data presented in the financial statements. The research also revealed differences in scope of disclosed information, as well as its fragmentary nature. As a result, the comparison of data between groups in the energy sector in terms of their assets is impossible. Our study fills a research gap on the effects of using IFRS for the presentation and valuation of CO2 emission rights in the Polish energy sector and the impact of a differentiated approach to disclosures on the true and fair view conception in financial reporting.

Data-driven modeling of CO2 emission-allowance compensation for wood-purchasing optimization toward carbon–neutral forest industry

The faster market changes of EU’s CO2 emission allowance price have increased operation challenges in wood supply of forest industry. The objectives of this study are to present basics of its data-driven modeling for purchasing renewable forest wood. Particularly, the effects of the changes in prices and available carbon sink are considered in management of wood purchasing at the level of the local districts. Two scenarios described procurement situations in non-renewable carbon sinks. The results were compared to the scenario in renewable carbon sink of carbon–neutral forestry. Time-varying emission-allowance parameters of models affected wood purchase and deliveries in the districts. Therefore, cost efficiency of wood-supply operations, as well as the utilization rate of renewable wood resources, can be optimized by data-driven dynamic wood-flow models in digitalized decision support. In addition, the results testify that the model optimizes wood purchasing in the districts at the way of CO2 emission allowance market. Therefore, by using the model wood-supply operations could be optimized toward carbon neutrality, which is important success factor of forest industry.

Greening of the District Heating Systems—Case Study of Local Systems

The integration of renewable energy resources into district heating systems is gaining momentum across Europe, as heat producers are expected to work towards the EU Directive of Efficient District Heating and Cooling to achieve carbon neutrality by 2050. This paper studies the techno-economic implications of transforming conventional district heating systems of six locations in Poland, generating 8.5 PJ of heat annually, into sustainable and efficient district heating systems. These new systems consist of flat solar collectors integrated with seasonal pit thermal energy storages and gas heating plants, acting as flexible heat sources, covering residual heat demand and/or increasing the parameters of the working medium in the network. Using the IEA-TIMES software, two scenarios were considered, namely STAT and DYN. The results show that reaching a 20% share of heat production by solar thermal would demand extra construction of seasonal heat storage facilities with a total capacity of 197 TJ, which is approximately 4.5 times bigger than the largest seasonal heat storage located in Vojens, Denmark. The projected increase in the prices of natural gas and CO2 emission allowances accelerates the transformation of systems towards greater use of solar heating plants. In the period 2025–2050 the heat generation costs increase by ca. 65%. The contribution of the CAPEX and OPEX costs components are presented.

Wind Energy Market in Poland in the Background of the Baltic Sea Bordering Countries in the Era of the COVID-19 Pandemic

The economic crisis caused by the COVID-19 pandemic reinforces the problem of rising electricity prices, which mainly affects countries that are forced to pay ever-higher CO₂ emission allowance fees (e.g., Poland). In the light of signals confirming the need for intensive development of the wind energy market in the Baltic Sea region, the authors consider the need to examine this issue concerning Poland and the Baltic States (i.e., Lithuania, Latvia and Estonia) as extremely important and demanding. The development of the RES market is currently an absolute necessity. The immediate neighbourhood and similar general social and economic conditions of Poland and the Baltic States enable factual comparisons, reinforcing the rationale for choosing the adopted research area. The main objective of the study was to assess the development of the wind energy market in Poland in the background of the Baltic Sea bordering countries in the era of the COVID-19 pandemic, in order to try to answer the question: what direction of wind energy development in Poland in the realities of the COVID-19 pandemic is justified and may have an impact on limiting the increase in electricity prices in this country? In this context, it turned out to be particularly interesting to identify solutions practised in the wind energy market in the Baltic States with their potential to be applied in Poland. The research instruments were drawn from an economic analysis and evaluation of phenomena and supported by the results of our own research (questionnaire) conducted on the Polish energy market, to substantiate the findings.

Abandoning peat in a city district heat system with wind power, heat pumps, and heat storage

The Finnish Government has established the target of carbon-neutrality by 2035. In Finland, district heating (DH) networks in most cities rely on carbon dioxide (CO2) intensive fuels such as coal and domestic peat. This study assesses the decarbonization of a Finnish city’s DH by employing power-to-heat (P2H) technologies, including heat pumps, an electric boiler, and thermal storage together with an ambitious building energy renovation program. This study also aims to use wind power with a calculated fixed price instead of the market price for the electricity consumption of the deployed P2H units to further support electrification and decarbonization of the DH network. Bilateral contract between the wind producer and the DH operator is examined, as new wind power producers receive no subsidies in Finland. The impacts of storage capacity, electricity tax, building-level renovation, and European CO2 emission allowance (EUA) price on the DH’s optimal operation and break-even price of heat production were evaluated. The optimization routine minimizes marginal production costs. The optimal scenario eliminated the carbon intensive fuel peat with more affordable heat prices, due to P2H technologies, lower electricity tax, higher EUA prices, and the renovation of buildings. Bilateral electricity contract can bring mutual benefits for the DH company and the wind producer.

Energy Production from Biodegradable Waste as an Example of the Circular Economy

A growing population, technological progress and economic development result in a constant increase in energy demand. Energy is mostly obtained from fossil energy resources such as coal, natural gas, and crude oil. Burning them leads to air pollution with greenhouse gases (CO2, CH4, NH3 and N2O) and dust (PM2.5 and PM10). They are recognized as the cause of global warming and air pollution. Wind, water, solar and biomass energy are used to eliminate harmful emissions. The latter may come from special plant crops or from biodegradable waste from farming, animal husbandry, the agrifood industry and households. These wastes are transformed into biogas in biogas plants, the basic ingredient of which is methane. Most often, biogas is burned in a cogeneration process, providing electricity and heat. After purification of admixtures, it can be injected into the high-methane gas network or converted into hydrogen in the steam reforming process. In this way, environmentally harmful waste becomes a raw material for energy production, which is an example of a circular economy. The article discusses the functioning of biogas plants in selected EU countries. The current biogas production in Poland was assessed and compared with the production potential of dairy farms. The aim of this article was to show that the production of biogas reduces the emission of greenhouse gases into the atmosphere and the electricity produced from it is not burdened with the cost of purchasing CO2 emission allowances applicable in the EU.

Application of Real Options Approach to Analyse Economic Efficiency of Power Plant with CCS Installation under Uncertainty

The main goal of this article is to build a decision model for an investment involving the addition of a CCS (Carbon dioxide Capture and Storage) installation in an existing conventional power plant. The application of CCS systems in coal and gas power plants involves large capital expenditures and an increase in operating costs. The lack of upgrade modernisation and environmentally friendly investments in this type of power plant generates the additional costs of the purchase of emission allowances. An analysis of the impact of the addition of a CCS installation to an existing coal power plant on the costs of electricity generation is presented. Based on the accessible technical and economic data, a concept has been framed and an original decision-making model has been developed for an investment consisting in constructing a CCS installation in an existing power plant. A novelty of the paper is the presented proprietary decision-making model in conditions of uncertainty using the real options approach. Stochastic state variables are included in the model: the price of the CO2 emission allowance, the unit costs of capturing, transporting, storing and stockpiling CO2 and the unit costs of electricity generation. It is assumed that the time curves of the state variables are described by equations of geometric Brownian motions. The values of standard deviations in the equations are measures of uncertainty. The value of the retrofit option is defined as the maximum value from the expected net present value. From the dynamic optimisation equation, resulting from Bellman’s principle of optimality, it results that the retrofit option must satisfy the differential equation. The calculations were made for a specific, commercially applicable case of CCS technology in order to present the model’s capabilities. The analyses’ results and conclusions are presented.

Long-Run Effects of EU Energy Assets and Co2 Emission Allowances

Long-Run Effects of EU Energy Assets and Co2 Emission Allowances

The prospects for decarbonisation in the context of reported resources and energy policy goals: The case of Poland

The European Union climate and energy policy obliges Member States to abandon the consumption of fossil fuels. Poland remains one of the very few European countries where the importance of coal in the economy is still maintained through political decision. Yet it faces the challenge of energy transition that will inevitably lead to a reduction in domestic coal exploitation and, in consequence, mine closures. The steps in the decarbonisation roadmap should take into account both economic criteria (resources, profitability of mining) and social issues, due to the loss of a significant number of jobs in the mining sector. This paper aims to present the assumptions on the decommissioning of mines in the context of the resources reported and mining licences granted. Moreover, these decisions are assessed in relation to the announced goals of Energy Policy of Poland until 2040 (EPP document) in which steam coal demand is forecast for two cases (high and low) depending on the prices of CO2 emission allowances. The objective of the paper is to critically analyse the assumptions of this document in the context of the established schedule of mine decommissioning. The schedule was agreed with the social side in September 2020. The analysis shows that the conditions of that agreement will have to be renegotiated and the closing date of several mines will need to be brought forward. Oversupply of coal occurs both with the implementation of the case of high demand and of low demand for steam coal announced in the Energy Policy for Poland document.

Decarbonisation – Origins and Evolution of the Process on the European Level

Decarbonisation of the european economy is one of the most important megatrends that will shape economic and social development in the coming years. This paper discusses the basic concepts of decarbonisation in terms of climate change, the history of this idea development and the legal basis introduced in the European Union, including key European documents and tools influencing the process, like ETS or CO2 emission allowances. Background on decarbonisation has been presented as a European roadmap to achieve a low-carbon economy in Europe. In the article the main assumptions of the EU strategy papers like Clean Energy for All Europeans or the European Green Deal are presented. Casus Silesia indicates the basic problematic issues that coal regions will have to tackle to due to the transition away from coal. For European societies, the new environmental policy of the European Commission means the intensification of activities to reduce greenhouse gas emissions and switching the economy to low- or zero-carbon energy sources and technologies. The decarbonisation of the economy is an ongoing process which has been gaining momentum in recent years. The coal transition is a huge challenge, particularly for Poland.

Technical and Economic Analysis of Low-Emissions Modernization of Existing Heating Plants in Poland

An analysis is performed with regards to technologically outdated heating plants operating in many areas where fossil fuels such as coal and gas are utilized, in order to consider the alternatives of their modernization. By application of a chart using a variety of alternatives, the economic feasibility of executing two types of modernization of heating plants are explored: a single-fuel gas–steam CHP plant and a coal-fired heating plant to a coal-fired CHP plant with a condensing turbine. This study demonstrates how the selection of modernization technology is affected, in terms of profitability, by the value and variability in time of the price relationships between energy carriers, rapidly growing charges related to CO2 emission allowances, and costs depending on other pollutant emissions that originate from the operation of electricity and heat sources powered by fossil fuels. In both technical cases of modernization, lower prices of energy carriers coupled with CO2 emissions allowances lead to higher prices of electricity that can be sold as additional products following this modernization, and consequently, the specific cost of heat production in the repowered heat sources is lowered. The calculations were performed by the application of models of heating plant modernization applying continuous time notations, which offer the determination of the most suitable time of initiation of this modernization. Such relationships would be difficult to describe in the case of the use of traditional discrete models. In the case of a simultaneous increase in the prices of all main factors affecting the cost of heat generation, such as the price of gas, electricity and CO2 emissions, the fastest modernization of the heating plant to single-fuel gas–steam CHP provides the possibility of the best economic performance.

Nexus between green bonds, financial and environmental indicators

This study uses a novel perspective to examine the causal connectedness between green bonds and other conventional assets, including clean energy, price of CO2 emission allowances, Bitcoin, and the S&P 500 stock market covering from January 2013 to March 2019. We apply the Multilayer Perceptron Neural Network Non-linear Granger causality and Transfer Entropy to detect possible changes in the causal direction between green bonds and other considered variables. We find a bidirectional relationship between green bonds, S&P 500, and Bitcoin markets, while green bonds have a unidirectional connection with the price of CO2 emission allowances.

CO2 emission allowances and their interacion with economic and energy factors in the European Union


 Analysis of emission allowances prices has important environmental and political connotations. This article aimed to identifying the possible variables that may influence their behaviour and studied their relationship with fundamental factors: energy (Brent petroleum, Gas, Coal) and economy (Industrial Production Index, Baltic Dry Index, Purchasing Managers Index). With the objective of analyzing possible mutual interactions, Multivariate VAR or Error Correction Models (VECM), were applied. The information analysed derived from different sources (World Bank, Sendeco2 and various financial websites). The results obtained showed, not only the influence of past prices on the emission allowances actual price, but also the interaction with energetic and economic variables.
 Highlights
 
 Estimation of time series interrelations through VAR models.
 There is relationship of the emission allowances price with their past values.
 The energy variables are factors important to also explain the behavior of the emission allowances price.
 The economic variables are hardly significant except for the Dry Baltic Index.

Techno-Economic Assessment of Coal-Fired Power Unit Decarbonization Retrofit with KP-FHR Small Modular Reactors

The near and mid-term future of the existing Polish coal-fired power fleet is uncertain. The longer-term operation of unabated coal power is incompatible with climate policy and is economically challenging because of the increasing price of CO2 emission allowances in the EU. The results of the techno-economic analysis presented in this paper indicate that the retrofit of existing coal-fired units, by means of replacing coal-fired boilers with small modular reactors, may be an interesting option for the Polish energy sector. It has been shown that the retrofit can reduce the costs in relation to greenfield investments by as much as 35%. This analysis focuses on the repowering of a 460 MW supercritical coal-fired unit based on the Łagisza power plant design with high temperature small modular nuclear reactors based on the 320 MWth unit design by Kairos Power. The technical analyses did not show any major difficulties in integrating. The economic analyses show that the proposed retrofits can be economically justified, and, in this respect, they are more advantageous than greenfield investments. For the base economic scenario, the difference in NPV (Net Present Value) is more favorable for the retrofit by 556.9 M€ and the discounted payback period for this pathway is 10 years.

燃料・排出権・卸電力の市場価格変動リスクの計測

燃料・排出権・卸電力の市場価格変動リスクの計測

Economic and environmental impacts of a proposed ‘Carbon adder' on New York’s energy market

ABSTRACT The New York Independent System Operator (NYISO) has developed a carbon-pricing proposal to reduce carbon intensive electricity generation in anticipation of future clean energy goals in the state. The proposed measure is a so-called ‘carbon adder’ on CO2 emissions from the power sector that targets the social cost of carbon amidst existing overlapping policies. The carbon adder is set as the difference between the targeted social cost of carbon and the prevailing RGGI price for CO2 emission allowances. We investigate the economic and environmental impacts from the imposition of a carbon adder on New York’s power sector. Our analysis indicates that the carbon adder gives the ‘right’ price signal for New York’s power generation to turn into a greener one and is shown to be more cost-effective than clean energy standards. Requirements for permit price floors in the RGGI market induces carbon permit retirements across RGGI states leading to small reductions in region- and country-wide emissions levels.The proposed border carbon adjustments on electricity trade are shown to further mitigate emission leakage. Key policy insights NYISO’s proposed carbon adder provides strong incentives for decarbonization and renewable power generation in the New York region. The carbon adder is shown to be more cost-effective than New York's clean energy standard measures in achieving an equivalent level of emissions reductions. This is because the carbon adder targets energy carriers by their specific CO2 emissions while the clean energy standard implicitly targets energy carriers by their specific CO2 emissions while the clean energy standard implicitly provides a uniform subsidy to all clean energy carriers. The existing RGGI price floor mechanism assures that NYISO’s unilateral use of carbon adder is environmentally effective by generating overall emission reductions in the RGGI region in order to maintain the existing price floor. Border carbon adjustments on the embodied carbon of electricity imports to New York, and an emission containment reserve, which dynamically adjusts RGGI cap as a response to RGGI price change, will likely mitigate leakage further and improve competitiveness of the New York’s energy sector.

Central and Eastern European CO2 Market—Challenges of Emissions Trading for Energy Companies

The aim of this article was to identify challenges of emissions trading that the Polish and CEE Central and Eastern Europe energy industry will face, as well as to indicate key implications for the competitiveness of the companies from the energy sector resulting from that trading. The EU Emissions Trading Scheme (ETS) is the emissions trading system, which results from the EU policy concerning climate change. It is a tool for reducing greenhouse gas emissions (GHG). The system regulates an annual allocation of the allowances. The price of CO2 emission allowances is subject to constant fluctuations because it depends on various macroeconomic factors as well as is an effect of proprietary trading by global investment banks. Polish energy companies have an increasing share in the emission of CO2 in the European market. This is due to the fact that other European countries are rapidly moving away from fossil fuel-fired sources. The cost per MWh related to CO2 price has been growing in the last 10 years from ca. 5 up to 30 EUR/MWh at the beginning of 2021. From an electric power utilities perspective, the ability to set up a proper strategy in trading CO2 will be crucial to be competitive in the wholesale power market. The higher price of CO2 (and electric power) at the domestic market in relation to more green (more renewable energy sources RES in energy mix) surrounding countries translates into a worse competitive position.

Techno-economic aspects of increasing primary energy efficiency in industrial branches using thermal energy storage

Thermal energy storage (TES) can play a key role in increasing primary energy efficiency in the industrial sector. Differences in location-specific conditions lead to differences in TES requirements across companies and to a lack of techno-economic knowhow regarding standardized implementation. This study provides a techno-economic overview of potential TES technologies (sensible, latent, thermochemical, and sorption) based on key performance indicators (KPI) and performs a qualitative pre-selection of the TES to be used in specific industrial branches at specific temperature levels. The outcome is a TES application matrix for industrial branches based on the quantified energetic and exergetic heat demand per temperature level and branch. This matrix is expected to facilitate and support the selection of future TES projects. The study demonstrates its methodology of estimating the energetic and exergetic heat demand of a country by applying it to Austria. In this case, the estimated energetic industrial heat demand is about 88 TWh/year, and the exergetic industrial heat demand is about 50 TWh/year. In the application matrix, 2,470 variants of industrial energetic heat demand and potential TES applications are evaluated. The results show that there is only a 6% match between a TES priority field of application and the fields with the greatest energetic heat demand. As the costs of a TES system influence its industrial use, an economic top–down method of determining the maximum costs (and thus economic viability) of a TES system is presented. The generic approach is demonstrated by conducting a case study of a cement plant. The acceptable storage costs are derived by determining the energy and cost savings relative to a conventional gas-driven energy supply system. Depending on the size of the TES, the acceptable costs are found to vary between 1.4 and 14.4 €/kWh for a capacity of 500 MWh and 1 MWh, respectively. A sensitivity analysis is also conducted to show how gas and CO2 emission allowance prices affect the acceptability of storage costs. The study also discusses the main considerations and factors in efficient TES selection and successful system integration. Finally, the development and innovation required to increase industrial use are outlined. The study's economic analysis of TES integration in a cement plant shows that TES implementation is not feasible under the present conditions unless appropriate measures and incentives are applied.