Skip to content

Does Auctioning Emission Rights Avoid State Aid? Empirical Evidence from Germany

Stefan Weishaar, Edwin Woerdman

DOI https://doi.org/10.21552/CCLR/2012/2/211



This paper presents empirical evidence of a small but statistically highly significant windfall profit in the German spot auctions of allowances under the EU Emissions Trading System in the second trading phase. Auction prices lie with 7 and 8 Eurocents below the Leipzig Energy Exchange and the Paris Blue Next market price, respectively. Compared to the Initial Public Offerings literature the under-pricing effect is small. However, it does call into question the wide-spread belief that allowance auctioning eradicates all windfall profits. Moreover, it is examined if these windfall profits give rise to State aid concerns. We argue that auctions in the second and third trading phase pass the private investor test and thus do not constitute State aid, although selectivity could become problematic in the third trading phase. We conclude that the political problem of windfall profits for the energy sector may persist in the third trading phase.

Share


Lx-Number Search

A
|
(e.g. A | 000123 | 01)

Export Citation