The Californian Emissions Trading System and Electricity Market | Umweltbundesamt

Electricity generation is the largest source of greenhouse gas emissions in many countries. Most emissions trading systems (ETS) therefore address emissions from electricity generation. The de-sign of an ETS and the structure and regulation of the electricity sector have a large impact on the environmental effectiveness and the quality of the carbon price signal. This report analyses the interaction of carbon and electricity markets in California. The price in the Californian ETS is largely determined by the floor price. Its impact on the electricity sector is limited because of a monolithic capacity mix and stringent complementary policies. This case study is part of the project “Influence of market structures and market regulation on the carbon market” that aims to identify the impact of market structures and regulations on carbon markets and to investigate the interdependencies between carbon and energy markets in Europe, California, China, South Korea, and Mexico.