Emission Allowances Research Articles

Alarming Contagion Effects: The Dangerous Ripple Effect of Extreme Price Spillovers across Crude Oil, Carbon Emission Allowance, and Agriculture Futures Markets

Alarming Contagion Effects: The Dangerous Ripple Effect of Extreme Price Spillovers across Crude Oil, Carbon Emission Allowance, and Agriculture Futures Markets

Valuation of Ecosystem Services Based on EU Carbon Allowances-Optimal Recovery for a Coal Mining Area.

This paper presents a new way of valuing ecosystem services based on the price of EU carbon dioxide emission allowances. Its main advantage is that it facilitates the monetisation of non-provisioning ecosystem services, which is the Achilles heel of current frameworks. The research approach is built on the notion that land rehabilitation and ecological restoration involve trade-offs between ecosystem services. A quantitative assessment (valuation) of these trade-offs is necessary to make sound decisions. However, using different valuation methods to estimate monetary values creates a non-comparability in the valuation process that is difficult to correct. To address this problem, in the first place, the propagation of imprecise preference statements in hierarchical weighting is proposed, avoiding the non-comparability caused by the different current approaches while reducing the effort of preference elicitation. In the second place, to achieve consistency, monetisation of all non-provisioning ecosystem services was carried on the above comparison and the monetary valuation of the attribute with the most direct and market-related valuation possible: carbon sequestration, using the EU Emissions Trading System. A former coal mining area exemplifies the valuation of ecosystem services provided by alternative ecological restoration scenarios. The aim is to estimate their contribution to human well-being, understand the incentives faced by decision makers to manage ecosystems in different ways and assess the values of alternative solutions. An exercise is then carried out to show that the price of EU carbon permits (as of December 2021) after the price escalation that coincides with phase 4 of the allocation of allowances under the EU Emissions Trading System can be estimated by prioritising biodiversity over other ecosystem services.

Merging Climate Action with Energy Security through CCS—A Multi-Disciplinary Framework for Assessment

Combining biomass-fired power generation with CO2 capture and storage leads to so-called negative CO2 emissions. Negative CO2 emissions can already be obtained when coal is co-fired with biomass in a power plant with CCS technology. The need for bioenergy with CO2 capture and storage has been identified as one of the key technologies to keep global warming below 2 °C, as this is one of the large-scale technologies that can remove CO2 from the atmosphere. According to the definition of bioenergy with CO2 capture and storage, capturing and storing the CO2 originating from biomass, along with the biomass binding with carbon from the atmosphere as it grows, will result in net removal of CO2 from the atmosphere. Another technology option for CO2 removal from the atmosphere is direct air capture. The idea of a net carbon balance for different systems (including bioenergy with CO2 capture and storage, and direct air capture) has been presented in the literature. This paper gives a background on carbon dioxide removal solutions—with a focus on ecology, economy, and policy-relevant distinctions in technology. As presented in this paper, the bioenergy with CO2 capture and storage is superior to direct air capture for countries like Poland in terms of ecological impact. This is mainly due to the electricity generation mix structure (highly dependent on fossil fuels), which shifts the CO2 emissions to upstream processes, and relatively the low environmental burden for biomass acquisition. Nevertheless, the depletion of non-renewable natural resources for newly built bioenergy power plant with CO2 capture and storage, and direct air capture with surplus wind energy, has a similar impact below 0.5 GJ3x/t of negative CO2 emissions. When the economic factors are a concern, the use of bioenergy with CO2 capture and storage provides an economic justification at current CO2 emission allowance prices of around 90 EUR/t CO2. Conversely, for direct air capture to be viable, the cost would need to be from 3 to 4.5 times higher.

Economic and environmental impacts of EVs promotion under the 2060 carbon neutrality target—A CGE based study in Shaanxi Province of China

As the world's largest emitter of CO2, China has committed to achieving carbon neutrality by 2060. For the high emission of the transport sector, the promotion of electric vehicles (EVs) is an important way to reduce CO2 emissions in the road transport sector. Due to the current high proportion of coal-fired power in Shaanxi province, the indirect emission of EVs is greater than the direct emission of fuel vehicles. In this study, two regional dynamic CGE models were constructed to evaluate the economic and environmental impact of EVs promotion and power generation structure optimization under the carbon neutral target in Shaanxi province. The results show that the promotion of EVs and optimization of the power generation structure will reduce the carbon emissions of electricity used in the transport sector from 4.5 million tons to 0.1 million tons. Compared with the baseline scenario, the NOX, SO2, and PM emission in the carbon neutrality scenarios has decreased by 50%, 65%, and 32%, respectively in 2060. Further, the GDP loss of carbon neutrality scenarios compared to the baseline scenario in 2060 is between 7.9% and 12.3%. Fortunately, the promotion of EVs and the promotion of the power generation structure can help to optimize the allocation of carbon emission allowance, which would alleviate the GDP loss caused by the carbon neutrality target. So it is necessary to encourage the development of EVs and vigorously develop renewable energy at the same time in other provinces with similar power structure like Shaanxi.

Effectiveness of CO2 cost pass-through to electricity prices under “electricity-carbon” market coupling in China

This paper analyzed the coupling relationship between the carbon market and power market and constructed a threshold regression model of carbon cost pass-through to electricity prices. Furthermore, a system dynamics model was built based on “electricity-carbon” market. The results show that first, the carbon market and power market operate independently but are interrelated. The two markets will work when Chinese emission allowances and carbon prices are effectively connected with carbon emissions and electricity prices. Second, because the electricity price formation mechanism is mainly regulated by China's government, the carbon price has a significant negative effect on the electricity price since the operation of the national carbon trading system. There is no obvious linkage effect between the CO2 cost and electricity price. Third, under the current policies and market mechanism, the carbon price will experience the process of “remain low-rapid rise-remain high”. The carbon price will drive the on-grid price and sales price up. The allowance auction mechanism and carbon cost direct pass-through can effectively reflect CO2 cost in the electricity price. In the long term, introducing auctioning in the carbon market and reforming electricity price formation in the power sector will tap the emission reduction potential.

Greenhouse gas emission rights in accounting – is a global benchmark needed?

Purpose: The aim of the article is to verify accounting methods used to map the essence and specifics of greenhouse gas emission rights trading in corporate financial reporting. Methodology/approach: A literature review and an analysis of national and international environmental regulations and accounting guidelines were conducted for the United States, Canada, New Zealand, China, Japan, Germany, Great Britain, France, and Poland. The EU market for trading greenhouse gas emission allowances and the efforts made by the International Accounting Standards Board are presented separately. Findings: There is a regulatory gap in the recognition, measurement and disclosure of greenhouse gas emission rights in the financial statements. So far, no environmental accounting regu-lation (standard) of international importance has been adopted, although few of the proposals from national environmental organizations differ between jurisdictions. Practical implications: There is a need to fill the identified regulatory gap and improve financial reporting by establishing consistent and uniform principles for recognizing, measuring and presenting greenhouse gas emission rights. Originality/value: The article emphasizes the importance of the accounting information system in providing a coherent picture of the achievements of economic entities (including environmental performance) and identifies challenges for the scientific discipline of accounting in relation to the development of greenhouse gas emissions trading around the world.

Review of Closed SCO2 and Semi-Closed Oxy–Fuel Combustion Power Cycles for Multi-Scale Power Generation in Terms of Energy, Ecology and Economic Efficiency

Today, with the increases in organic fuel prices and growing legislative restrictions aimed at increasing environmental safety and reducing our carbon footprint, the task of increasing thermal power plant efficiency is becoming more and more topical. Transforming combusting fuel thermal energy into electric power more efficiently will allow the reduction of the fuel cost fraction in the cost structure and decrease harmful emissions, especially greenhouse gases, as less fuel will be consumed. There are traditional ways of improving thermal power plant energy efficiency: increasing turbine inlet temperature and utilizing exhaust heat. An alternative way to improve energy efficiency is the use of supercritical CO2 power cycles, which have a number of advantages over traditional ones due to carbon dioxide’s thermophysical properties. In particular, the use of carbon dioxide allows increasing efficiency by reducing compression and friction losses in the wheel spaces of the turbines; in addition, it is known that CO2 turbomachinery has smaller dimensions compared to traditional steam and gas turbines of similar capacity. Furthermore, semi-closed oxy–fuel combustion power cycles can reduce greenhouse gases emissions by many times; at the same time, they have characteristics of efficiency and specific capital costs comparable with traditional cycles. Given the high volatility of fuel prices, as well as the rising prices of carbon dioxide emission allowances, changes in efficiency, capital costs and specific greenhouse gas emissions can lead to a change in the cost of electricity generation. In this paper, key closed and semi-closed supercritical CO2 combustion power cycles and their promising modifications are considered from the point of view of energy, economic and environmental efficiency; the cycles that are optimal in terms of technical and economic characteristics are identified among those considered.

Carbon Emission Abatement Allocation of a Recycling Production System in a Fuzzy Environment

Appropriate measurement of environmental performance and emission allowances in circular economy is of great significance for promoting sustainable development. Due to the vagueness involved in many circular indicators, a fuzzy network data envelopment analysis model for the carbon emission abatement (CEA) allocation of a recycling production system is proposed in this work. The proposed model employed the concept of environmental efficiency analysis while allocating the optimal CEA levels from a circular economy perspective. An empirical application to the CEA allocation of European Union (EU) countries is studied. Our results provide the EU policy makers and legislators a valuable information for emission allowances management in a fuzzy environment.

Connectedness among El Niño-Southern Oscillation, carbon emission allowance, crude oil and renewable energy stock markets: Time- and frequency-domain evidence based on TVP-VAR model

Understanding the interactions among climate change, carbon emission allowance trading, crude oil and renewable energy stock markets, especially the role of climate change in this system is of great significance for policy makers, energy producers/consumers and relevant investors. The present paper aims to quantify the time-varying connectedness effects among the four factors by using the TVP-VAR based extensions of both time- and frequency-domain connectedness index measurements proposed by Antonakakis et al. (2020) and Ellington and Barunik (2021) [8,48]. The empirical results suggest that, firstly, the average total connectedness among climate change, carbon emission allowance trading, crude oil and renewable energy stock markets is not so strong for the heterogenous fundamentals underlying them. Nevertheless, the time-varying total connectedness fluctuates fiercely through May 2005 to September 2021, varying from about 8% to 30% and rocket to very high levels during the global subprime mortgage crisis and the COVID-19 pandemic. Furthermore, the total connectedness mainly centers on the short-term frequency, i.e., 1–3 months. Secondly, climate change is generally the leading information contributor among the four factors, although not particularly strong, and its leading role also performs mainly on the short-term frequency (1–3 months). Thirdly, renewable energy stock market and crude oil market show tight interactions between them and they are the two major bridges of information exchanges across various time frequencies (horizons) in this system. Finally, we confirm the evidence that the primary net connectedness contributor and receiver switch frequently across different time frequencies, implying that it is extremely essential for policy makers, energy producers/consumers and investors to make time-horizon-specific regulatory, production/purchasing or investment decisions when facing the uncertain effects of climate change on the interactions among carbon emission allowance, crude oil and renewable energy stock markets.

German stakeholder perceptions of an EU carbon border adjustment mechanism

The European Commission has proposed a carbon border adjustment mechanism (CBAM) that would apply the carbon price prevailing in the EU emissions trading system to import-related emissions. We conducted a survey to study perceptions of an EU CBAM among German key stakeholders from industry, civil society, and research in July 2021. We find that substantial support for CBAM exists as well as the expectation that the mechanism will eventually be introduced. We identified divergent views on key design options among stakeholder groups. Stakeholders from industry generally favour the continuation of free allocation of emissions allowances, rebates for exporters from the EU, coverage of only scope 1 emissions, and use of revenues for domestic spending. Stakeholders from civil society prefer phasing out free allocation, coverage only of imports, an emissions scope including all indirect emissions, exempting low-income countries and countries that do implement non-price-based climate policies, and the use of revenues to finance green transformation in low-income countries. Respondents from research would generally rather see free allocation being phased out, emissions coverage of scope 1 and 2, exemptions for low-income countries and countries that do implement non-price-based policies with comparable effects in relevant sectors and a transfer of revenues to support clean technologies in low-income countries and green technologies in the EU. Our survey design allows us to identify three cross-stakeholder group clusters, one containing stakeholders who are comparably more hesitant towards CBAM, a second one with respondents most in favour of introducing CBAM, as well as a ‘middle ground’ cluster which contains views that are often in between the other two. We also compare the survey responses to the design of the Commission’s CBAM proposal to identify the most likely points of political disagreement.

Modeling volatility and dependence of European carbon and energy prices

We study the prices of European Emission Allowances (EUA), whereby we analyze their uncertainty and dependencies on related energy prices (natural gas, coal, and oil). We propose a probabilistic multivariate conditional time series model with a VECM-Copula-GARCH structure which exploits key characteristics of the data. Data are normalized with respect to inflation and carbon emissions to allow for proper cross-series evaluation. The forecasting performance is evaluated in an extensive rolling-window forecasting study, covering eight years out-of-sample. We discuss our findings for both levels- and log-transformed data, focusing on time-varying correlations, and in view of the Russian invasion of Ukraine.

Optimal carbon taxation in EU frontrunner countries: coordinating with the EU ETS and addressing leakage

ABSTRACT Several EU countries have targets for the reduction of CO2e emissions that go beyond the target set by the EU. We study what would be the optimal carbon tax policy in such EU frontrunner countries, focusing on two questions: 1) How should national climate policy be coordinated with the European Emissions Trading System (ETS), and 2) How should an EU frontrunner country address the risk of carbon leakage? We show that these issues are closely linked and that the answers to the two questions depend on the following factors: i) The shadow cost assigned to carbon leakage, ii) The rates of carbon leakage in the ETS and non-ETS sectors, and iii) The price of ETS emission allowances relative to the domestic marginal abatement cost of attaining the desired reduction of domestic emissions. Our analysis shows that it is preferable for an EU frontrunner country to implement a national ETS sector carbon tax that results in a higher total carbon price in the national ETS sector compared to the national non-ETS sector. We illustrate how our theoretical model can be combined with a modified version of the GTAP-E general equilibrium model of the world economy to estimate the parameters of the optimal national carbon tax scheme in an EU frontrunner country, using Denmark as an example. We find that the ETS sector should pay a total carbon price that is between 33 and 78 percent above that of the rest of the economy depending on the aversion to carbon leakage. Key policy insights It is generally optimal for an EU frontrunner country – one with a domestic emission target beyond that set by the EU – to implement a national ETS sector tax. The total national carbon price should be higher in the ETS sector compared to the non-ETS sector. Data for Denmark indicate that the total national ETS sector carbon price should be at least 33 percent higher than that of the national non-ETS sector.

Derivative Instruments on Emission Allowances: factors Influencing Disclosure in Portuguese Companies

Purpose: This article aims to analyze the degree of disclosure of information on Derivative instruments on Emission Allowances, analyzing the degree of compliance with the underlying accounting regulations, and their determinants factors. Theoretical framework: With the evolution of the European Union Emission Trading System (EU ETS), which foresees that the emission licenses will no longer be allocated free of charge and will be negotiated at auction, it is expected that there will be an increase in the trading of derivative instruments on licenses, to cover any risks of future price fluctuations, and therefore an increase in disclosure in this area. Design/methodology/approach: The methodology used in this study was the content analysis of the Reports and Accounts of the sample entities over a 12-year period, based on the creation of disclosure indexes for the topics under analysis. This is a longitudinal study that seeks to address possible changes in the behavior of companies' reporting practices in the periods 2008-2102 and 2013-2020 (corresponding to the 2nd and 3rd phases of the EU ETS). Findings: The results of the derivative disclosure index, in general, is higher (average IDGD is 0.81), although it is still very low when it specifically refers to derivative instruments for risk hedging related to emission licenses (IDL_LE = 0.11). Contrary to expectations, not only companies do not use this type of instrument to cover the risk of fluctuations in the price of licenses, nor is the change in the behavior of companies between the 2nd and 3rd EU ETS periods significant. Regarding the explanatory factors studied, there is only a statistically positive correlation between the disclosure index and profitability. Research, Practical & Social implications: The study will focus on a sample of companies operating in Portugal, which are part of the National Emission Licensing Plan (PNALE) I and II. The literature is silent on previous studies related to disclosure on emission allowances derivatives, so our study represents a contribution to the advancement of literature in this area. Originality/value: As far as we know, previous studies related to the disclosure of derivative instruments for gas emission licenses are non-existent, so our study represents a contribution to the advancement of the literature in this area.

CO2 price effects on the electricity market and greenhouse gas emissions levels: an application to the Spanish market

This research proposes an empirical method to estimate the impact on the wholesale electricity market of an increase in the price of CO2 emission allowances. The current literature in this field is mainly focused on long-term simulation analyses, while this study carries out a short-term analysis with microdata from the electricity market. A higher price of CO2 implies an increase in the electricity generation costs of polluting units and therefore an increase in the price of the electricity market. When CO2 becomes more expensive, polluting electricity generators are shifted in the hourly electricity supply curve towards less competitive positions (in favour of less polluting/cheaper units). Displaced polluting units could even be taken out of the market, which would imply a reduction in CO2 emissions. These short-term movements can be reproduced with our microdata of the day-ahead electricity market –data Provided by the Spanish Market Operator (OMIE). According to our results, increases in the carbon price of 10, 20, or 30 € per ton, respectively, cause increases of 1.8%, 4.2% and 5.3% in the electricity price (year 2018), while the negative effect on emissions is relatively small. Our analysis concludes with the estimation of an ARIMA-SARIMA model that looks for the main determinants of the variations in the hourly energy prices and the carbon emissions. The estimations show that the marginal supply technology in the electricity market is important in explaining these variations.Graphical abstract

Restoring Coal Mining-Affected Areas: The Missing Ecosystem Services.

Multi-criteria decision analysis and cost-benefit analysis, either individually or in combination, have been used as the preferred tools to develop ecosystem services valuation, presenting significant discrepancies and variations between the calculated values. To counteract this problem, a new framework was developed based on a hierarchical weighting of the non-provisioning ecosystem services, using biodiversity as the reference ecosystem service since it is the easiest to apprehend. Their monetisation was made using the average price of EU carbon dioxide emission allowances during 2019 and 2020, obtaining reasonable and comparable results in line with what was expected for the study region. However, the revised EU Emissions Trading System Directive, which will apply from 2021-2030, generated a price escalation of carbon allowances, making it necessary to adjust or rethink the proposed framework. To achieve this goal, the paper proposes the introduction of new vectors or "missing ecosystem services" to counterbalance efforts to eliminate carbon dioxide emissions without necessarily removing humans from the equation: welfare and human health. As the linkages regarding ecosystem health, ecological restoration and human health are not well known, only welfare was incorporated into the framework. The results were highly satisfactory, in line with what was expected for the study region and the ones obtained before the price escalation of carbon allowances that started in 2021.

Green Finance and the EU-Taxonomy for Sustainable Activities: Why Using More Direct Environmental Policy Tools Is Preferable

Abstract The EU taxonomy on sustainable activities is expected to pave the way for steering capital towards sustainable investments. However, the economic effects are problematic. Promoting “green” capital will lead to income losses due to productivity differences, while greenhouse gas emissions do not change at a given EU emission allowance cap. Worldwide emissions may even increase as carbon intensive production moves outside the EU. While green finance may be used to bind future governments, committing to future climate goals directly is a superior policy since efficiency losses can be avoided.

Impact of Changes in Membership on Prices of a Unified Carbon Market: Case Study of the European Union Emissions Trading System

Using the event study methodology, the paper studies the effects of 22 key events in countries’ process of entering and exiting the European Union on returns of European Union Allowance (EUA) future prices in the EU Emissions Trading System (EU ETS). The events include 17 entry events concerning the signing of relevant agreements, becoming a candidate or potential candidate country, the process of a negotiation and formally entering the EU, and five exit events including the process of Brexit and the suspension of Iceland. The results show that two entry events involving Albania and Ukraine, respectively, have a significant positive impact, and five entry events have a significant negative impact. Among the exit events, the announcement of the Brexit referendum results causes significant negative market reaction. Most events regarding small carbon emitters entering the EU lead to negative cumulative abnormal returns (CAR) of EUA prices, and a significant negative correlation between the countries’ annual average carbon emissions and CAR is found, while the change of national allocation plans does not affect the market reaction notably. In the process of establishing a unified carbon market, regulators should carry out appropriate policy arrangements of emission allowances allocation when new members join, in order to guide market expectations and enhance market stability.

CO2 Emission Reporting of Maritime and Air Transport in the Context of Sustainable Development

Abstract The transport industry, and especially aviation and maritime transport, emits significant amounts of CO2, adversely affecting the environment. The Sustainable Development Goals not only indicate the need to reduce CO2 emissions, but also to provide access to information on the amount of emissions, on top of their environmental and financial impacts. The main source of this type of information is found in financial and non-financial statements prepared by entities of the transport sector. CO2 reporting disclosures should be subject to the principle of true and fair view ensuring adequate materiality, transparency and comparability of information. The aim of the article is to assess the scope and method of reporting information on CO2 emissions in the financial and non-financial statements of selected groups of the air and maritime transport sector. By means of content analysis, disclosures on this subject were reviewed and compared against the applicable legal regulations in the field of CO2 emissions reporting for the industry. The results of the research indicate a significant differentiation in the methods of reporting, in particular relating to the valuation and presentation of CO2 emission allowances in reports on the financial position in air transport and the manner and scope of reporting non-financial information in maritime transport. The obtained results indicate insufficient comparability of the reported information and a need for harmonisation of the provisions of law regarding the scope and forms of reporting. The findings also indicate a need to combine financial and non-financial information in single reports in order to properly interpret the effects of emissions.

Techno-economic modelling of the Baltic CCUS onshore scenario

Techno-economic modelling of the Baltic onshore CO2 transport, storage, and utilization scenario included HeidelberCement-owned Kunda Nordic Cement (KNC) plant, the main Estonian cement producer, four Estonian and one Latvian power plant and CO2 mineral carbonation of the oil shale ash, as possible CO2 use option. In 2019 nearly 6.5 Mt of oil shale ash (OSA) was produced in Estonia from energy production. Estonian OSA could be used as an effective sorbent in the proposed CO2-mineralization process, using CO2 from flue gas and producing precipitated CaCO3 (PCC) of high quality. Mineral carbonation of 0.42 Mt CO2 using 3.8 Mt of fresh OSA and about 6.33 Mt CO2 produced annually by five Estonian and one Latvian plant transported by pipeline for storage into the North-Blidene structure in western Latvia are combined in the CCUS scenario. Cambrian Deimena Formation reservoir sandstone is located at the depth of 1035-1150 m in the selected saline aquifer. The average optimistic storage capacity of about 270 Mt allows planning CCUS project for 30 years. The share of the Estonian emissions avoided and stored in Latvia is 86.5 %, including 8.2 % by KNC, while Latvian stored emissions will compose 13.5 %. Annually 6.8 Mt CO2 could be captured, transported and injected, including 6 Mt CO2 avoided using transport and storage and 0.42 Mt CO2 avoided using MC of Estonian OSA. During 30 years nearly 204 Mt CO2 will be captured, used and stored, while 193 Mt CO2 could be avoided. The total average transport and storage (T&S) cost of the scenario is 18.4 €/t CO2 injected. This cost depends on the transport distance, according to the applied methodology, and it is the most expensive for the Eesti Energia PPs. The lowest T&S cost of 5.54 €/t CO2 injected will have Latvenergo TEC-2 PP located at a smaller distance from the storage site. At the price of EEAP (CO2 Emission Allowance Price in EU ETS) of 40 €/t CO2 and 50 €/t PCC, the CCUS scenario could be beneficial for three Eesti Energia and Latvenergo TEC-2 power plants. For the KNC and VKG Energia plants without CO2 use options, the higher EEAP of about 48-50 €/t CO2 is needed to cover all CCUS costs including capture, compression, transport, storage and monitoring. The transport and storage costs are distance-dependent, as pipelines are the most expensive part of the transport, storage and monitoring costs. At the present EEAP of about 90 €/t CO2, all the participating plants will get benefits from the proposed scenario.This study is supported by CLEANKER project, which has received funding from the European Union’s Horizon 2020 research and innovation programme under Grant Agreement n. 764816.

Techno-economic assessment of CO2 capture possibilities for oil shale power plants

Oil shale is a calcium-rich fossil fuel, and its combustion in power plants generates high CO2 emissions, which must be reduced drastically. Thus, this study conducts a comparative techno-economic analysis of adding CO2 capture technologies, namely, post- and oxy-fuel combustion technologies, to existing oil shale power plants in Estonia. Estonia's energy sector is unique due to its heavy reliance on oil shale. The study's technical analysis indicates that oxy-fuel combustion capture would outperform post-combustion capture in oil shale power generation. However, integration of CO2 capture technology would result in reductions in power units' heat rate performances by more than 10% points due its energy requirements. From a financial perspective, the feasibility of Estonian oil shale power plant CO2 capture depends upon the long-term trends in the electricity market and CO2 emissions trading system. Full-capacity operation over an assumed 24-year lifetime would cost at least 89 euros per ton of CO2 captured and stored in 2021 values. The actual cost might exceed paying CO2 emission allowance fees and environmental charges or result in a competitive disadvantage. Thus, only in the event that the negative externalities resulting from CO2 emissions and national energy security concerns cannot be feasibly mitigated with alternative, stable, and controllable energy sources should state aid be used for CO2 capture technologies for oil shale power plants. The need to impose higher taxes, ceteris paribus, to cover the state aid or transfer the CO2 capture costs to the private sector might reduce the Estonian economy's overall competitiveness.