We analyze how different ways of allocating emission quotas may influence the electricity market. Using a large-scale numerical model of the Western European energy market, we show that different allocation mechanisms can have very different effects on the electricity market, even if the total...

We analyze how different ways of allocating emission quotas may influence the electricity market. Using a large-scale numerical model of the Western European energy market, we show that different allocation mechanisms can have very different effects on the electricity market, even if the total...

Allocation of emission allowances may affect firms' incentives to invest in clean technologies. In this paper we show that so-called output-based allocation tends to stimulate such investments as long as individual firms do not assume the regulator to tighten the allocation rule as a consequence...